Emerging Asian economies have not avoided the glare of bad publicity surrounding the emerging market slowdown, but there are many reasons to remain positive for the region’s long-term growth prospects. Putting the five largest emerging Asian consumer markets under the microscope reveals some key long term strengths.
Increase in Consumer Expenditure in 5 Largest Emerging Asian Markets v 5 Largest Advanced Economies: 2013-2020
Source: Euromonitor International from IMF/national statistics/Eurostat
Note: Data are in constant 2012 prices
China to See US$3.5 Billion Increase in Consumer Spending
China’s rebalancing is leading to slower growth than in recent years, in 2012 China grew by 7.8%, the slowest pace in 13 years; but a larger consumer base will eventually lead to better quality growth – and more opportunities for multi-nationals. In 2020, per capita consumer expenditure is expected to reach US$3,822 (in 2012 prices). Taken overall this equates to growth in consumer expenditure of US$2,170 billion – compared to growth of US$2,227 billion over the same period in the USA and US$633 billion in the eurozone. The government is also in a strong position to stimulate the economy when needed – its stimulus of 2013 has already led to an acceleration of growth to 7.8% in the third quarter (over the same period of the previous year).
Indian Growth is Lagging, but Reform Could See Consumer Market Grow by US$ per Annum
Economic growth in India has been disappointing, since its peak of 11.2% in 2010. The economy is in dire need of structural reform and improvements to the business environment – India was
ranked 134 out of 189 economies in the World Bank’s latest Ease of Doing Business report. Particular problems include weak infrastructure, bureaucracy, high inflation and the large current account deficit. However, with a population of 1.2 billion in 2013, and 68.0% still living in rural areas, the long-term potential of the country is huge. Urbanisation would unlock growth
potential and drive consumer spending. In 2010, when the economy grew by 11.2%, total consumer expenditure increased by US$44.9 billion. With a new Head of the Reserve Bank and an election in May 2014 the first shoots of optimism may be beginning to re-appear, but growth prospects and sustained optimism remain dependent on reform; without which, the country may be unable to escape the “Hindu rate of growth” for many more years.
Indonesian Consumer Market to Rival South Korea’s by 2020
Inflationary pressure driven by the removal of fuel subsidies and the depreciation of the rupiah are hurting private consumption. Infrastructure is poor, which adds to the cost of doing business and the business environment itself is relatively difficult – with the country ranked 120 out of 189 in the World Bank’s 2014 Ease of Doing Business survey. However, unemployment is low, and has decreased in 2013 to an expected 5.8% and despite slower economic growth, Indonesia is still expected to be the world’s 14th largest economy in PPP terms by 2020. In 2020, 28.7 million households will have disposable incomes over US$10,000 indicating spending power approaching US$30 per day. In terms of size, the consumer market in 2020 will come close to that of South Korea.
Thailand Beats Canada for Ease of Doing Business
The Thai economy is in the doldrums in 2013. Growth for the year is expected to come in at 3.6% – less than half the rate of 2010 (the recent peak). The downturn is relatively broad-based with
weak exports and domestic demand both contributing factors. Yet Thailand has the best business environment of these five economies, and in 18th position, is second only to Malaysia in Emerging Asia, according to the World Bank’s Ease of Doing Business 2014 report. It is in fact easier to do business in Thailand than it is in Canada, Germany and Japan. Greater Bangkok households
had an average consumer expenditure of US$17,160 in 2013 – amongst the highest of these five economies. In the medium term, economic fundamentals are strong, and growth is expected to be steady to 2020. Much depends on the performance of the export and tourism sectors, which in 2013 contributed 59.5% and 8.1% to GDP respectively.
Philippines BPO Industry Key Driver of Income Growth
The Philippines is one of the success stories in the region and is expected to report the fastest growth of these five economies this year. In 2006, its consumer market was the same size as Denmark’s, but by 2012 it was 23% larger. Between 2013 and 2020, consumer expenditure in the Philippines is expected to increase by 45% compared to an average of 26% globally and 37% in Asia Pacific overall. The economy benefits from a strong and growing business processing outsourcing (BPO) industry, the employees of which, with their relatively high incomes, have been boosting private consumption – aided by continued growth in remittances. Real GDP growth is expected to average 6.0% between 2013 and 2020.
A Market Worth a Combined US$8,300 Billion in 2020
These five countries, the largest consumer markets in Emerging Asia, will have a combined market size of US$8,300 billion in 2020 (in 2012 prices), an increase of US$3,068 billion – or equivalent to another UK and France combined – since 2013. Even with the challenges outlined here, and slower rates of growth than in recent years, this market should not be overlooked. Much of the speed of these markets’ growth depends on the successful implementation of reform, but even so there is much to be gained from doing business in Emerging Asia.