In Asian economies, a powerful dynamic is unfolding that will unleash productivity growth and drive outperformance over other regions. It is a trend that has been under-appreciated by sceptical investors.
Over the next two years, gross domestic product will rise faster in Asia than in the Americas and Europe, strengthening its position as the largest and fastest-growing economic bloc. Asia’s GDP is expected to expand in nominal terms from $33tn in 2021 to $39tn in 2023, exceeding the $34tn for the Americas and $26tn for Europe. The $5.4tn increase for Asia compares with $4.8tn for the Americas and $2.9tn for Europe.
This dynamic is the interplay of growth in exports, capital expenditure and productivity. In contrast to other economies that have relied heavily on stimulus, Asia’s recovery from the Covid-19 shock has been fuelled by a sharp upturn in exports. Investors may be tempted to write this off as a reflection of a revival of global growth, but what happens next is arguably much more interesting.