2021 has been a challenging year for “emerging markets”, including those in East Asia where Melchers operates. The spread of the Delta variant has been one underlying cause, but far from the only one. Deep troubles in China’s previously buoyant property sector, highlighted by the Evergrande crisis, coupled with long-term demographic challenges and a tough zero-covid strategy have all contributed to a slowdown in this region’s dominant economy – a slowdown which has also massively affected nearby export-reliant nations. The year has also seen the impact of tighter regulations, disruption in supply chains and logistics, increasing inflation, and a “tapering” of the Federal Reserve’s economic stimulus measures in the USA.
On 14th December, after outbreaks of Covid-19 lead to slower growth in Q3, the Asian Development Bank revised its 2021 growth forecasts for the “developing Asia” bloc down again to 7.0%, and growth forecast for 2022 down from to 5.3%. ADB also expects regional inflation to remain “manageable” in 2021, at 2.1%, but to increase to 2.7% in 2022.
Growing or slowing?
Predictions for 2022 as a whole really do need to be broken down further, to be understood more clearly; the region in still experiencing something of an upsurge of activity after all, so how long is this expected to last?
Commentators including the Japanese bank Nomura are suggesting that 2022 could be something of “a game of two halves”, with Aisa’s “bumpy upcycle” extending into the first half of 2022. Rising vaccination rates and booming ecommerce transactions are releasing a catch-up in consumer consumption and services such as hospitality. Supply bottlenecks in Southeast Asian factories are easing, and books are healthy in the short-term due to inventory re-stocking demands, and exports.
However, Nomura expects an “export growth downturn” to begin in the middle of the year, as other factors gain ascendency – including spill-over effects from China’s domestic slowdown, and a fading of North America and Europe’s pent-up demand for goods.
Important “Known unknowns”
There are significant “unknowns” ahead in 2022 also, chief among which is the possibility of new vaccine-tolerant Covid strains appearing across the world. China’s domestic economy is a regional risk too, and somewhat hard to predict. In addition to an unsettled property sector, 2021 saw a number of regulatory crackdowns affecting powerful tech companies like Alibaba and Didi, and industries as diverse as educational tutoring and online gaming; no-one would be surprised if more were to occur in 2022, with China’s all-important 20th Party Congress scheduled for the later part of the year. Tough tactics from the CCCP, even when aimed at delivering domestic stability, could potentially lead to trade standoffs with the US, and a “taking of sides” among smaller East Asian nations.
As we move forward into 2022, it will be especially important to keep a close eye on local developments, in order to assess where consumer and industrial markets are heading, and make good decisions.
Melchers in East Asia. A global player – with personality.
Melchers is a global company with a wide range of services, and with trading know-how in diverse areas of business. We know from experience that successful businesses are based on trust – our Aisa network is a vibrant testament to that. We’ve been commercially active in China since 1866, and we’re here to support your growth in Asia too.
