globalEDGE Blog: What is in Store for Asia During 2016?

What is in Store for Asia During 2016?

2015 was a year of reality checks for Asia, realizing no country can grow at double digits forever, commodities dug out of the ground can't be sold at ridiculously high prices, and cheap U.S. money doesn't last forever. Now what will 2016 hold for Asia?

Starting out with China, the great slow down shall continue. Official growth rates will come in around 6.5%, while true growth rates will be much lower than that - with most economic forecasts coming in around 5.8%. A corruption crack down will continue after finding out that local governments had been inflating growth rates in the past. This crack down will pinch area budgets, pushing spending and consumption down even further. It is expected that China will see more monetary easing and fiscal easing, but these stimulus programs are unlikely to boost growth drastically. The key to a successful 2016 for China will be to drive consumption and develop the service sector.

India should prove to be the star performer in 2016, with growth forecasts coming in around 7.5%. India is a net oil importer and taking advantage of the low oil prices will make it easier for the government to transition the gas-guzzling public from spending on expensive fuel subsidies to spending more in 2016 on welfare programs, with hopes that a major consumption boost will drive growth in India. Another tactic of the country to boost consumption is through raising wages for civil servants in India's middle class.

In Japan, growth should be slow but stable in 2016. A weaker yen will make exports more competitive, and as the U.S. Fed continues to raise interest rates, the yen should continue to weaken.  Demand for Japanese goods will rise in the U.S. and in other markets across the globe.

Much is projected to happen in South East Asia. Malaysia and Indonesia are also in jeopardy of continued currency weakness and capital outflows, as the U.S. Fed continues to elevate interest rates. South East Asia could reap some reward from China's slowdown, as more factories will move from China to Cambodia, Vietnam, and Myanmar. The frontier markets are looking at growth between 6% and 7% during 2016, with a youthful and comparatively cheap labor force ready to become the next big factory of the world.

Things are looking a bit bleaker for Australia in 2016, with slow growth projected and jobs being slashed. A 1 billion Australian dollar fund to boost a creative and innovative economy has just recently been established.

It seems that 2016 will hold a lot of questions and a relatively bleak outlook for most of Asia. During this year, make sure to keep up on business related topics from Asia and from all over the globe on the globalEDGE blog

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