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HSBC Economists Believe Asia Will Enjoy Strong Growth in 2021

Diep Nguyen
BizLIVE -

In Asia, the economy of mainland China has been first in and out of the clutches of the virus. Its recovery has been impressive, widening from construction initially to consumption and services eventually.  

HSBC Economists Believe Asia Will Enjoy Strong Growth in 2021
Photo Credit: Reuters
The headline numbers don't tell the story. Economic hardship has gripped many, even in the parts of Asia that have been relatively resilient. At last, with vaccines now on their way, the recovery will strengthen and broaden. Still, as Janet Henry and James Pomeroy note in a recent report, amid all the current optimism, it is easy to forget the scale of the damage of the 2020 recession, and the scars may yet show after the initial bounce in activity (Global Economics Quarterly: The next phase, 17 December 2020).
In Asia, the economy of mainland China has been first in and out of the clutches of the virus. Its recovery has been impressive, widening from construction initially to consumption and services eventually. And the headlines will continue to look punchy: HSBC's Chief China Economist, Qu Hongbin, expects growth to top 8% in 2021. While base effects flatter the reading, it marks a return to vibrancy, allowing officials to set their sights again on long-term structural adjustments, not least holding in check any overly rapid build-up in leverage.
Taiwan, too, has had an impressive year, containing successfully the virus at home and riding the global surge in electronics demand. And the expansion looks set to strengthen in 2021, not least because of strengthening investment locally. Hong Kong, meanwhile, grappled with periodic lockdowns in 2020, adding to the hardship over the prior year. But with the threat of the virus fading, and stability returning, growth should finally bounce back.
Japan has contained the virus amiably, but it wasn't spared the economic impact. Despite vast fiscal support measures, the recovery may be more gradual than elsewhere, in part because the economy is more exposed to the still weak global capex cycle than others. Korea, by contrast, and in many ways like Taiwan, has seen its tech exports surge over the past year and avoided a big hit to domestic demand. The Korean economy should improve further in 2021, even if its headline growth rate will look a little less impressive than the rate of other economies.
Australia has come through 2020 in better shape than many peers, with limited infections at home and generous policy support, both fiscal and monetary. The recovery should prove fairly robust, if not quite enough so for the central bank to put its foot on the brake. New Zealand, equally, has been generous with policy support, and the bounce should be strong, but closed borders are a drag.
India's economy has been harder hit than many others. But signs are mounting that the recovery is broadening. Still, while headline growth over the coming year will be the highest in the region, it will take a while longer to fully erase the output loss. Sri Lanka should bounce impressively, too.
In fact, it is here that we made the biggest upgrade to our forecasts recently. Bangladesh continues to impress with its resilience, supported by remittances and recovering garment exports.
ASEAN's performance has been uneven. Indonesia has struggled with rising infections for many months but managed to limit the impact on economic growth. 2021 should see a return to around trend growth, although, given the weak prior year, one would have hoped for more. The Philippines, after a strong run, stumbled harder than many others in 2020. 
Even if it may take a while to roll out vaccines, growth should turn positive nonetheless. Malaysia was caught in another wave at the end of 2020, but recovery should set in soon, topping that of most of its neighbours. Thailand halted the virus in its tracks, but the plunge in tourists took its toll. 

DIEP NGUYEN