With import demand in Europe and the U.S. eroding, countries in East, South and Southeast Asia, except for Vietnam, face little prospect of export growth for the second half of 2013.
As a result GDP growth for 14 countries in the region will likely slow to 4 percent this year from 4.4 percent in 2012, according to Richard Martin, managing director of IMA Asia, a Singapore-based economic consultancy.
IMA Asia expects Asia’s developing markets to fare better, with the rate of GDP growth slowing to 6.2 percent from 6.8 percent in 2012.
“Over 6 percent growth for Asia’s developing markets looks good compared to emerging markets in other regions, but it is a big reduction from the 10 percent reported in 2010,” Martin said.
IMA is forecasting China’s GDP growth at 6.9 percent and India at 4.5 percent. “This will seem like recessions to firms in some sectors,” Martin said.
Despite slowing global growth, most of Asia has proved quite resilient. “When growth has slid, it has not been as big a fall as in other regions, and the rebound has been fast,” Martin said. The outcome has been a steady rise in Asia’s global market share.
IMA expects the 10 ASEAN countries, in particular, to have the capacity for a second year of good growth in a world of weak demand, although it has trimmed its 2013 growth forecast to 5.1 percent from 6 percent in January.
ASEAN exporters are being forced to absorb the cost of rising factory wages to keep their product prices competitive in global markets. “Higher pay costs are flowing into companies, but they have not been able to lift their product prices due to excess capacity in global markets and intense competition from global players to build positions in Asia,” Martin said.
“This dynamic — strong factory pay growth, but no capacity to lift prices — looks set to continue for several years, making productivity and cost reduction critical to success,” he said.
Only Vietnam is forecast to escape this trend, as a result of its small currency devaluation in June. IMA Asia expects Vietnam to continue to devalue the Dong over the next two years to keep its export prices competitive.