Why Asia-Pacific Economies Look Bright for 2024 and Beyond

Every January, investment banks, fund management and professional services companies like to publish their outlook for the year ahead, while this year is no different, the 2024 outlook may be more complicated than in previous years, but there is light at the end of the tunnel for the Asia Pacific (“APAC”) region.

The complications come from the ongoing conflicts in the Middle East and Ukraine that are impacting supply chains, energy and food, yet the major APAC economies are largely insulated, and numerous forecasts for 2024 and beyond have one consistent theme, which is resilient growth by APAC economies in both consumption and exports.

This growth momentum is underpinned by strong expansion in domestic consumption of goods and services among the major regional nations, notably China, India and Indonesia, as well as growing intra-regional trade in raw materials, intermediate goods and final manufactured products.

According to S&P Global Market Intelligence, Vietnam and India should both lead economic growth this year, followed by Indonesia and China. Foreign direct investment from China and the rest of the world into ASEAN nations in 2024 and beyond should further bolster regional manufacturing, trade and economic interdependence.

There are key industries driving regional economic growth, such as electronics and telecommunications especially with the roll out of 5G. One particular sector is a significant economic engine: the automotive industry, which is undergoing disruption with electric vehicles (“EV”) and autonomous driving, and has supply chains which include batteries, sensors, automobile components, software and artificial intelligence.

Five Chinese EV brands including BYD are expanding manufacturing in Thailand and using it as a base for further expansion across ASEAN, taking advantage of the country’s existing manufacturing expertise and infrastructure; such expansion would contribute to regional economic growth.

There is also noticeable recovery in services particularly in retail and hospitality, as tourism is regaining strength.

Moreover the economic fundamentals of APAC are healthy and better than other parts of the world. Inflation is not an issue, remaining subdued, while corporate debt is at a manageable level with the credit market stable. Furthermore, UBS is of the opinion that the Mainland China property correction has been played out, and with policy support, from 2024 onwards, the sector should recover creating significant economic activity. The Swiss bank also sees a rebound for Asian equities, with double-digit returns, creating the conditions and sentiment for a more active IPO market.

Thus, despite ongoing conflicts and uncertainties, the APAC region is on a solid footing and is positioned to continue to lead the world in economic growth with a robust 4.6% expansion for 2024, compared to 1.2% and 0.6% of the US and Eurozone respectively, according to UBS.