<h2>Executive Summary </h2><ul><li><p>In the last two decades, <strong>America’s GDP</strong> has on aggregate grown by 21% more than the Eurozone’s, underpinned by strong capex, robust industrial policies and a growing working-age population.</p></li><li><p>The <strong>US and China</strong> are poised to continue driving global market growth, contributing a total of USD 8.8 trillion and USD 5.6 trillion, respectively, over 2023-28.</p></li><li><p><strong>India</strong> will be the world’s fastest-growing major economy over the next 5 years. While the manufacturing sector’s share of GDP has plateaued at 18%, the focus will be on expanding local industry to meet domestic demand</p></li><li><p><strong>Japan</strong> continues to see a decline in its global GDP share while <strong>Taiwan</strong> and <strong>South Korea</strong> are maintaining a stable position.</p></li><li><p><strong>Malaysia</strong> is well-positioned to acquire businesses relocating from the major North Asian economies but <strong>Thailand</strong> and <strong>the Philippines</strong> both face domestic challenges.</p></li></ul>.<p>With 2024 around the corner, it is a good time to take stock of the prospects for global – and Asian – growth. China is visibly slowing, part of the eurozone are in recession and America may not be able to hold off a downturn for much longer. Added to this mix, geopolitical risks have spiked and elections are due in India, the US and probably the UK. At a recent joint online session of the India CEO and CFO Forums, Richard Martin, Founder and Managing Director of IMA Asia, assessed the risks and opportunities that lie ahead and offered unique insights from an East-Asian vantage point.</p>.<h2><strong>An Ongoing US-Eurozone Realignment</strong></h2><p>Since 2003, the United States has consistently outpaced the Euro area. Its GDP has grown by 21% more than Europe’s, fuelled by a 33% gap in capital investment, or Gross Fixed Capital Expenditure. Some key contributing factors include the US’ more robust Covid-19 stimulus, resulting in a 9.4% fiscal deficit in 2021 (twice that of the Euro area). Further differentiating the regions is America’s aggressive industrial policy, which is now even attracting firms from Europe and Asia. Demographically, from 2002 to 2021, Europe’s working-age (15-64) population declined by 2.3% while the US’s grew by 14%.</p><p>In 2022, America’s GDP (~USD 26 trillion) was about 80% bigger than Europe’s (~USD 14 trillion). Strikingly too, while the US has managed to maintain its ~25%-of-world-GDP share since 1991, the Euro area’s has declined from 25% to 14%. Neither inflation (averaging 2.5% in the US and 2% in Europe over 1992-2022), nor exchange rates (~1.09 euros/USD both now and in 2023) explain this gap. Rather, the underlying drivers include demographics, capital dynamics and industrial structures.</p>.<h2><strong>The Global View to 2028</strong></h2><p>The IMF’s latest projections indicate that India may be the world’s fastest-growing economy over 2024-28, averaging 6.4%. Following it are the ASEAN-6 countries (4.9%) and Sub-Saharan Africa (4.1%). China has slipped from its pre-Covid leadership position and is projected to grow at ~4% annually. However, it continues to generate more new-market-creation each year –USD 1.6 trillion on the back of a USD 18 trillion economy than America’s USD 1.1 trillion on a larger (USD 22 trillion) market.</p><p>Looking ahead, the world’s two biggest economies are poised to continue driving global market growth, contributing a total of USD 8.8 trillion and USD 5.6 trillion, respectively, over 2023-28. By comparison, India (USD 2.1 trillion) will create more market opportunities than the ASEAN-6 combined (USD 1.6 trillion). On aggregate, Asia is expected to account for nearly half of the world’s total market growth in this period.</p>.<h2><strong>Drivers Of Re-alignment In Asia</strong></h2><p>A rebalancing of growth is underway in Asia, driven by three primary factors. First, China’s rapid rise, starting with its WTO entry in 2001, eliminated export barriers and made it the world’s top consumer of commodities, cars and luxury goods. This also led to a surge in outbound tourism. Second, rising Chinese manufacturing wages since 2006, partly owing to market restrictions, has prompted labour-intensive industries to start move to countries like Vietnam and Bangladesh in the last decade. Third, as a result of Donald Trump’s trade war with China, manufacturing hubs have been relocating to Mexico, Poland, Southeast Asia and India.</p><p><strong>China’s</strong> slowdown is driven partly by demographic shifts, though balanced to a degree by rural-urban migration. Some of the key challenges ahead include a legacy of poor capital allocation decisions and a struggling stock market (despite it ranking second globally in the number of unicorns). Although China has a substantial base of savings and forex reserves, in the short term, it must contend with a collapse of confidence in the real-estate sector, falling house prices, a crisis in local-government finance, and limited fiscal and monetary support. Medium-term strategies will need to address structural property-market issues and redefine fiscal roles. In the long term, China is focusing on wealth-boosting policies, urbanisation, education and safer investment options. Recent spending programmes and efforts to shore up local government debt indicate a degree of flexibility towards fixing the country’s problems.</p><p><strong>India</strong> is poised to see its global market share rise from ~1% to ~4.5%. Underpinning its relatively-strong GDP growth projections for the second half of this decade is a continuing workforce expansion, with ~7 million workers added annually. It has challenges stemming from low levels of education but is now prioritising this area. India also excels at mobilising capital through the stock market as well as venture funding and is actively working towards creating a unified national market. The manufacturing sector’s share of GDP has plateaued at 18% but there is a growing focus on industries that meet domestic demand.</p><p><strong>Indonesia’s </strong>workforce is expanding by 1 million a year and its education scores surpass India’s. The country is open to 100% foreign-owned schools but there is a challenge with low female workforce participation. Despite maintaining a higher savings rate than India, local firms face difficulties accessing capital, a problem compounded by its comparatively small stock market. In previous years, manufacturing’s share of GDP declined as industries relocated from Indonesia to China. However, its current focus is on mineral-based industrialisation, which is expected to boost manufacturing as well as GDP growth (7.8% over 2025-30, up from 5.2% in the preceding 5 years). Since joining the WTO in 2006, <strong>Vietnam’s</strong> share of global manufactured exports has risen sharply. The country has experienced a demographic tailwind in recent years but net workforce growth will slow to 0.2 million a year over 2022-32. With high education scores and a strong female workforce participation rate, Vietnam has seen rapid industrial upgrading, particularly in clothing and footwear (since 2000) and electrical and electronics (since 2013). It faces issues with corruption and inflation but is forecast to return to 6%+ GDP growth, with manufacturing contributing 25% of the total.</p><p>In the major industrial markets of North Asia, <strong>Japan</strong> is experiencing a decline in its global economic share while <strong>Taiwan</strong> and <strong>South</strong> <strong>Korea</strong> are maintaining a stable position. Collectively, these nations host numerous world-class manufacturing companies renowned for cutting-edge technology and exceptional global management teams. The manufacturing engines propelling their economies are, however, detached from the broader economy. This is on account of various factors: Taiwanese factories are relocating on account of geopolitical risks; Japan is facing domestic market shrinkage; and Korea has to contend with high wages and a relatively small domestic market.</p><p> Who will end up gaining the most from a relocation away from these economies? At the moment, <strong>Malaysia</strong>, with its strong export manufacturing base, appears better positioned than either <strong>Thailand</strong> or the <strong>Philippines</strong>. However, its relatively small workforce is a challenge. Thailand, on the other hand, faces issues around low population growth and political risks, which create supply-chain uncertainties. Finally, while the Philippines’ manufacturing base is expanding, its growth trajectory hinges on domestic demand.</p>
<h2>Executive Summary </h2><ul><li><p>In the last two decades, <strong>America’s GDP</strong> has on aggregate grown by 21% more than the Eurozone’s, underpinned by strong capex, robust industrial policies and a growing working-age population.</p></li><li><p>The <strong>US and China</strong> are poised to continue driving global market growth, contributing a total of USD 8.8 trillion and USD 5.6 trillion, respectively, over 2023-28.</p></li><li><p><strong>India</strong> will be the world’s fastest-growing major economy over the next 5 years. While the manufacturing sector’s share of GDP has plateaued at 18%, the focus will be on expanding local industry to meet domestic demand</p></li><li><p><strong>Japan</strong> continues to see a decline in its global GDP share while <strong>Taiwan</strong> and <strong>South Korea</strong> are maintaining a stable position.</p></li><li><p><strong>Malaysia</strong> is well-positioned to acquire businesses relocating from the major North Asian economies but <strong>Thailand</strong> and <strong>the Philippines</strong> both face domestic challenges.</p></li></ul>.<p>With 2024 around the corner, it is a good time to take stock of the prospects for global – and Asian – growth. China is visibly slowing, part of the eurozone are in recession and America may not be able to hold off a downturn for much longer. Added to this mix, geopolitical risks have spiked and elections are due in India, the US and probably the UK. At a recent joint online session of the India CEO and CFO Forums, Richard Martin, Founder and Managing Director of IMA Asia, assessed the risks and opportunities that lie ahead and offered unique insights from an East-Asian vantage point.</p>.<h2><strong>An Ongoing US-Eurozone Realignment</strong></h2><p>Since 2003, the United States has consistently outpaced the Euro area. Its GDP has grown by 21% more than Europe’s, fuelled by a 33% gap in capital investment, or Gross Fixed Capital Expenditure. Some key contributing factors include the US’ more robust Covid-19 stimulus, resulting in a 9.4% fiscal deficit in 2021 (twice that of the Euro area). Further differentiating the regions is America’s aggressive industrial policy, which is now even attracting firms from Europe and Asia. Demographically, from 2002 to 2021, Europe’s working-age (15-64) population declined by 2.3% while the US’s grew by 14%.</p><p>In 2022, America’s GDP (~USD 26 trillion) was about 80% bigger than Europe’s (~USD 14 trillion). Strikingly too, while the US has managed to maintain its ~25%-of-world-GDP share since 1991, the Euro area’s has declined from 25% to 14%. Neither inflation (averaging 2.5% in the US and 2% in Europe over 1992-2022), nor exchange rates (~1.09 euros/USD both now and in 2023) explain this gap. Rather, the underlying drivers include demographics, capital dynamics and industrial structures.</p>.<h2><strong>The Global View to 2028</strong></h2><p>The IMF’s latest projections indicate that India may be the world’s fastest-growing economy over 2024-28, averaging 6.4%. Following it are the ASEAN-6 countries (4.9%) and Sub-Saharan Africa (4.1%). China has slipped from its pre-Covid leadership position and is projected to grow at ~4% annually. However, it continues to generate more new-market-creation each year –USD 1.6 trillion on the back of a USD 18 trillion economy than America’s USD 1.1 trillion on a larger (USD 22 trillion) market.</p><p>Looking ahead, the world’s two biggest economies are poised to continue driving global market growth, contributing a total of USD 8.8 trillion and USD 5.6 trillion, respectively, over 2023-28. By comparison, India (USD 2.1 trillion) will create more market opportunities than the ASEAN-6 combined (USD 1.6 trillion). On aggregate, Asia is expected to account for nearly half of the world’s total market growth in this period.</p>.<h2><strong>Drivers Of Re-alignment In Asia</strong></h2><p>A rebalancing of growth is underway in Asia, driven by three primary factors. First, China’s rapid rise, starting with its WTO entry in 2001, eliminated export barriers and made it the world’s top consumer of commodities, cars and luxury goods. This also led to a surge in outbound tourism. Second, rising Chinese manufacturing wages since 2006, partly owing to market restrictions, has prompted labour-intensive industries to start move to countries like Vietnam and Bangladesh in the last decade. Third, as a result of Donald Trump’s trade war with China, manufacturing hubs have been relocating to Mexico, Poland, Southeast Asia and India.</p><p><strong>China’s</strong> slowdown is driven partly by demographic shifts, though balanced to a degree by rural-urban migration. Some of the key challenges ahead include a legacy of poor capital allocation decisions and a struggling stock market (despite it ranking second globally in the number of unicorns). Although China has a substantial base of savings and forex reserves, in the short term, it must contend with a collapse of confidence in the real-estate sector, falling house prices, a crisis in local-government finance, and limited fiscal and monetary support. Medium-term strategies will need to address structural property-market issues and redefine fiscal roles. In the long term, China is focusing on wealth-boosting policies, urbanisation, education and safer investment options. Recent spending programmes and efforts to shore up local government debt indicate a degree of flexibility towards fixing the country’s problems.</p><p><strong>India</strong> is poised to see its global market share rise from ~1% to ~4.5%. Underpinning its relatively-strong GDP growth projections for the second half of this decade is a continuing workforce expansion, with ~7 million workers added annually. It has challenges stemming from low levels of education but is now prioritising this area. India also excels at mobilising capital through the stock market as well as venture funding and is actively working towards creating a unified national market. The manufacturing sector’s share of GDP has plateaued at 18% but there is a growing focus on industries that meet domestic demand.</p><p><strong>Indonesia’s </strong>workforce is expanding by 1 million a year and its education scores surpass India’s. The country is open to 100% foreign-owned schools but there is a challenge with low female workforce participation. Despite maintaining a higher savings rate than India, local firms face difficulties accessing capital, a problem compounded by its comparatively small stock market. In previous years, manufacturing’s share of GDP declined as industries relocated from Indonesia to China. However, its current focus is on mineral-based industrialisation, which is expected to boost manufacturing as well as GDP growth (7.8% over 2025-30, up from 5.2% in the preceding 5 years). Since joining the WTO in 2006, <strong>Vietnam’s</strong> share of global manufactured exports has risen sharply. The country has experienced a demographic tailwind in recent years but net workforce growth will slow to 0.2 million a year over 2022-32. With high education scores and a strong female workforce participation rate, Vietnam has seen rapid industrial upgrading, particularly in clothing and footwear (since 2000) and electrical and electronics (since 2013). It faces issues with corruption and inflation but is forecast to return to 6%+ GDP growth, with manufacturing contributing 25% of the total.</p><p>In the major industrial markets of North Asia, <strong>Japan</strong> is experiencing a decline in its global economic share while <strong>Taiwan</strong> and <strong>South</strong> <strong>Korea</strong> are maintaining a stable position. Collectively, these nations host numerous world-class manufacturing companies renowned for cutting-edge technology and exceptional global management teams. The manufacturing engines propelling their economies are, however, detached from the broader economy. This is on account of various factors: Taiwanese factories are relocating on account of geopolitical risks; Japan is facing domestic market shrinkage; and Korea has to contend with high wages and a relatively small domestic market.</p><p> Who will end up gaining the most from a relocation away from these economies? At the moment, <strong>Malaysia</strong>, with its strong export manufacturing base, appears better positioned than either <strong>Thailand</strong> or the <strong>Philippines</strong>. However, its relatively small workforce is a challenge. Thailand, on the other hand, faces issues around low population growth and political risks, which create supply-chain uncertainties. Finally, while the Philippines’ manufacturing base is expanding, its growth trajectory hinges on domestic demand.</p>
