Asia, Real GDP YOY%
2015201620172019E2020E2021E
Asia, Real GDP YOY%2.93.84.3454.9
China6.86.76.86.36.26
Hong Kong1.92.23.62.72.83.1
India7.26.86.37.47.67.8
Indonesia5.255.15.55.45.6
Japan0.90.9210.40.7
Kazakhstan1.20.44.33.53.33.1
Malaysia4.64.36.25.154.7
Mongolia2.415.1
New Zealand3.23.83.42.92.92.9
Pakistan4.55.45.85.65.25
Philippines6.16.96.76.66.77
Singapore1.923.62.82.52.6
South Korea2.82.93.12.82.72.8
Sri Lanka2.55.33.24.75
Taiwan-0.823.22.322
Thailand2.93.33.93.73.93.6
Vietnam76.67.56.66.76.5
[Negative] Teg: Japan

The government announced a new annual economic policy package in June, which were added economic reforms and an investment strategy for revitalization of the country. However, I don't expect that this year's plan to stimulate the economy and decrease the fiscal deficit will be achieved, due to pressure from an ageing population. Anyway if implementation of the policy would be successful, I think all growth prospects would be overlapped by increasing tensions in global commerce caused by destructive US trade policy. Therefore it's not clear for me how this year's economic results could recover Japan's economy and achieve the government's measures to stimulate growth and inflation.

[Negative] Teg: China

I expect the slowdown in China's economic growth in the near-term, driven by reduction in domestic demand, which would be the main constraint on achieving ambitious plan of the government for economic expansion. Also I think that slowdown in industrial production will continue its negative trend and will lead to volatility in domestic financial markets, based on concerns about risks related to the trade outlook. Probably, US-China trade tensions will fresh strain and will make a negative direct impact on the Chinese economy. That's why I have bearish view on China's economy in the mid-term.

[Positive] Teg: Vietnam

In near-term perspective, I assume Vietnam will continue to benefit from economy growth driven by export growth, inflows of foreign direct investment and high level of labor force (coupled with low unemployment rate). Real weakening of Vietnam's Dong (due to lower nominal rate and lower inflation) is additional support for export growth. Nevertheless, I assume that there are risks that worth to be noted: 1) Export: (a) low diversification (20% of all Vietnam's export is Samsung's Vietnam-based manufacturing plants), (b) threat of protectionism and declining of global trade. 2) Public debt rapid growth (~65% of GDP). Planned measures to lower the growth rate of public debt will lead to lower lower government spending (particularly, on infrastructure projects). 3) Private debt rapid growth. In long-term perspectives there is a risk of worsening situation in banking system (current level of bad debts ~5%). 4) Demographic: rapidly aging population (therefore, there is a need to implement a long-term program for productivity increasing)

[Negative] Teg: Indonesia

My negative outlook on Indonesia's economy reflects the ongoing deficit in merchandise trade balance, which will keep on during 2018-2022. The negative trend of trade balance will be formed by higher commodity prices, as well as Indonesia's strong demand for imported capital goods. The main Indonesia's exports will continue to be natural resources, which will be under pressure due to widening of tariffs on goods imported to the US and possibility of slowdown in China's economic growth. As a result, the trade surplus will not be enough to cover the solid deficit on the primary income account, which I expect to widen to 2022. This also reflects repatriation of funds by foreign firms, as well as an increase in borrowing costs related to Indonesia's large external bond debt, due to higher US interest rates.

[Positive] Teg: China

I expect that China's economy growth will be more moderate in coming years (6 - 6.5%), however, that will mainly caused by Government's plan of 'high-quality development': reducing of imbalances in economy, reducing pollution, stabilization of financing sector. As a result, it is expected (1) further decline in investment due to capacity cuts and stricter pollution controls, (2) tighter credit conditions that will lead to demand decreasing. In the same time, government is likely to support the growth by fiscal stimulus (through SOE and infrastructure projects). I assume that long-term results could be mostly positive for China economy (despite lower growth in near-term). However, there are some challenges for Government in near and long-term perspective: 1) Possible trade war with USA (that could cost for China 1-2% of GDP growth). 2) Demographic: rapidly aging population, declining labor force (one of the key issue announced by The Chinese Academy of Social Sciences, a leading government think tank). 3) Unemployment growth, particularly, due to planned reducing of imbalances in economy and capacity cuts. Coupled with rising living cost, this problem might create a social instability in China. 4) Local governments debts. Despite China conducts tighter monetary policy to stabilize its financing sector, the real situation with local governments debts is opaque (due to local government financing vehicles, public-private partnerships and possible faking reporting data)

[Positive] Teg: Indonesia

I expect further growth of Indonesia's economy, which will be accompanied by real GDP growth of 5.1% per year in 2018-2022. Growth in private consumption will remain strong and especially will be supported by election-related spending in 2019, as populist government measures for supporting household consumption. According to my forecast, the government's efforts to increase the inflow of private investments (domestic and foreign) in infrastructure and manufacturing will ensure capital raising in the mid-term. As a result, gross fixed investment will increase by 5.6% on average in 2018-2022.

[Positive] Teg: South Korea

In the near-term, I assume that Korean economy will be able to show relatively high growth rate (~3% in 2018-19) as a result of export growth (especially, in semiconductor industry) and fiscal stimulus (through government expenses increasing). In the long term, economic outlook is hazy as it relies on the possibility to solve fundamental economic problems (high level of unemployment, population ageing, high power of large enterprises called chaebol and low level of competitiveness), as well as on external political factors (negative - USA might withdraw from free-trade agreement, positive - possible recovery of relationship with North Korea).

[Positive] Teg: Japan

I think the government will continue the course of economic revival, which provides bold monetary and flexible fiscal policies, as well as structural reforms. Extension of these policies in 2018-2019 will mean that by 2020 Japan will have completed its longest period of economic recovery since the 1980s. The government will continue to implement structural reforms, however, I think it will be difficult for the country to achieve its ambitious goal of expanding the economy to $6 trn to 2021. In spite of the last weak results of private consumption and investment spending, I expect that Japan's real GDP will show stable growth averaging 1.2% a year in 2018-2022, given by the continued support of flexible fiscal policy and steady growth in external demand. In addition, in 2018-2022 I expect surplus in trade account provided by global goods export growth, restarting of more nuclear power plants, as well as increasing tourist arrivals, especially due to Olympics in 2020.

[Positive] Teg: China

I believe that China is able to achieve its goal, announced in April 2018 by the Communist Party of China, to double real GDP by 2020 compared with the level in 2010, that would require real GDP growth to average at least 6.3% a year in 2018-2020. Money squeeze in 2017 will make negative impact on economic activity, however, I think this is likely to be offset by looser economic policy settings. Therefore consumption and investment growth will remain stable in 2018. The external sector is sensible to US-China trade tensions, but I don't expect an escalation into full-blown trade war that could have a major impact on GDP growth in China. And in spite this trade frictions I expect that China's large merchandise trade surplus will expand over 2018-2022. Also, according to my expectations, the consumer prices will grow by an average of 2.6% per year in 2018-2022

[Negative] Teg: Japan

I expect that Japan economy will continue to grow with growth rate approximately equals to average growth rate in 2012-2017 (Abenomics beginning). The key driver for this is export growth (machinery, chemicals, and non-ferrous metals) due to weak yen and global economy growth. Monetary situation remains healthy as well: despite recent acceleration in inflation, its forecast is still below BoJ target. However, one should note several challenges for Japan economy: 1) Near-term challenges: (1) recent strengthening of yen that increases Japanese exporters concern, (2) weakness in consumer spending due to wages decreasing, as well as new housing construction falling. 2) Fundamental long-term challenge: planned increasing of national sales tax in 2019 from 8% to 10% to cover deficit in pension system (due to Japanese demographic situation). I assume that this will lead to economic growth slowing down (as in 2014 when this tax was increased from 5% to 8%)

[Positive] Teg: India

I think that further economic growth in India, with an average annual GDP growth of 7.6% in 2018-2023, will be supported by strong increases in private consumption and accelerating gross fixed investment. However, this will depend on progress in recapitalizing the banking sector, because a lack of broader reforms in the sector will continue to place constraints on lending activity. Also I see positive impact for the investor sentiment in government measures for improving the business environment, such as tax reforms and the increased digitalization of government-to-business services. However, India's trade deficit will remain high in 2018-2022, due to price of crude oil, which is India's largest import item in value terms. Exports will increase, but the rate of growth will be incommensurable in comparison with imports growth.

[Negative] Teg: India

India's outlook is more positive as many investors and agencies think, but such a positive factors are something like promises of the government's projection. I am very skeptical on this. Around 40% of industrial facilities face with low capacity utilization rate, infrastructure is poor in comparison to China, many banks have on its balance a lot of non-performing assets wherethrough invested a lot into non-perspective sectors. Well, high-loaded investments in infrastructure is very critical for economy growth in India. But nowadays there is no any measurable action on it. Thus, I would suggest rather faded prospects for 2018-2019, but brighter right after 2019

[Positive] Teg: India

In most analysts report the outlook for India is largely positive notwithstanding the fact of its slowdown in 2017. Such a growth 7.3%-7.5% for the next two years 2018-2019 adds economy of India as a fastest growing emerging market in Asia and in the world. I would quote factors from UN report: positive forecast is supported by robust private consumption and public investment as well as ongoing structural reforms. Indian government plans to improve Goods and Service Tax as well as Bankruptcy Code which will lead to more efficient trend of growth in Long-run. Once the government of India continues to carry out structural reforms, prudent macro policies and redistribute towards infrastructural project - we may really bet a lot into India's outlook - merely 8% per year in GDP terms.

[Positive] Teg: Hong Kong

Positive sentiment for helping high-tech businesses in Hong Kong - a promise given by Hong Kong's chief executive, Carrie Lam Cheng Yuet-ngor to reduce the profit tax on companies and grand tax remissions for their investments in R&D (research and development). This doubtless would attract existing business to invest more in qualifying research and development as well as would attract new investments from abroad to establish new technical divisions in Hong Kong

[Positive] Teg: China

At the moment most annalists emphasize that this year China are faced with threats and so called big worries: (a) US tax reform which result in capital flow from China into the US, (b) tightening of financial and environmental regulations, (c) slowdown of housing and infrastructure construction in 2018-2019

[Neutral] Teg: Japan

In Japan, growth trend is set to be maintained in 2018, but weaken thereafter as fiscal policy will benefit from planned consumption tax increase. I revised the growth less than 1% for the next years. As I think there is only one possibility to climb at 1% on even more is the expected growth of Global Demand, obviously from Main 3 (USA, China, EU). As per the USA and China - new incentives over softening of tax burdens on corporates - expected to be aggressive using Trump's words. Thus, import is the main driver for the economy of Japan. As It is easy to overestimate the influence of imports, I would tag neutral on the economy of Japan.

[Positive] Teg: Hong Kong

As per the local new incentives over tax in China and in the US are announced (I mean the softening of tax burdens on corporates) this we may reckon as a positive signal for HK outlook. As well, more finance analyst in Hong Kong are confident and optimistic about HK this year and the next 2019. As you understand Hong Kong is likely to catch up this positive effect (the recovery of the US and mainland China) for the simple reason that Hong Kong plays its role as international financial center - at lease one of the biggest.

[Negative] Teg: China

There are rumors that in light of china's currency depreciation, the central bank is likely to tighten liquidity. Obviously, it will raise further concerns in relation to the growth outlook of China. I explain: the US tax reform is underway, and once to be carried out this will cause interest rate increase in the US market, the will result in capital flow from China into the US and will ultimately weaken the yuan. Thus I think that GDP growth will slow.

[Negative] Teg: Hong Kong

I would attract your attention to some negative factors which I see would be the main obstacles for Hong Kong economy developing more that 5% per year (in GDP terms): (a) not enough investments to build-up resident property for meeting the rising demand, HK has very high property prices, (b) political environment does not give me confidence to invest and preserve value (as foreign investor), and (c) the competition from other countries in light industries, in tourism, in banking city center leadership.