Not too severe inflation helps Asian economy "surpass" the US and Europe

Morgan Stanley's chief economist for Asia Chetan Ahya stressed that by the fourth quarter of 2023, Asia's growth rate will outperform the US and Europe.

Asia's economic growth will surpass that of the US and Europe by the end of this year. (Source: CNN)

Explaining the above statement, Mr. Ahya said that China - the region's largest economy - will recover broadly by the end of 2023. Meanwhile, three other major Asian economies, India, Indonesia and Japan, are also showing strong increases in domestic demand.

One bright spot that makes Asia's recovery stronger than the US and Europe, according to Mr. Ahya, is that inflation is "not as fierce" as the other two regions.

Here, central banks do not need to tighten monetary policy too much, as inflation is only about half that of the US and Europe.

In the US, inflation fell to 4% in May, its lowest rate in two years, after peaking at 9.1% in June 2022.

Since March 2022, the US Federal Reserve (Fed) has started to raise interest rates monthly. After 10 consecutive rate hikes, in the policy meeting held on June 14-15, the Fed decided to keep interest rates at 5-5.25%, citing some promise in the fight against inflation.

Similarly, in Europe, Eurozone inflation fell to 6.1% in May, marking its lowest level since February 2022.

However, the European Central Bank (ECB) has given no indication that it will pause its action, with the region's interest rate currently at 3.25%, its highest level since November 2008.

But central banks in Asia have started cutting interest rates, including South Korea, Australia, India, Indonesia and Singapore.

Another driver supporting Asia's growth is China's expected recovery in the second half of this year.

Mr. Ahya said Morgan Stanley assessed that China's recovery would broaden further in the second half of this year and forecast the country's economic growth to reach 5.7% in 2023, nearly double last year's 3%.

Supporting the overall growth of the Asia region are India, Indonesia and Japan, all three of which are experiencing a positive domestic demand recovery cycle.

Ahya predicts India will grow 6.5% in 2023. And Japan is in a “sweet spot” of escaping deflation, while not having the severe inflation problems of the US and Europe.

Source: https://baoquocte.vn/lam-phat-khong-qua-du-doi-giup-kinh-te-chau-a-vuot-mat-my-va-chau-au-231182.html