Dynamics of growth in Asia

The current status of global economic growth has been labelled 'subdued' by the International Monetary Fund.

The danger is that this may bring about protectionism, as opposed to stimulating growth through new and innovative means of trade and investment mechanisms.

But what is clear is that Asia will continue to fuel global economic growth in the coming decade, if not decades.

As a region, it is forecast to grow at 5.1 per cent this year, maintaining the same rate as last year. This rate will be more than twice the global economic growth rate, which is forecast to sit at about 2.3 per cent.

Asia's trade and investment

Asia is a large market in itself, and is host to three of the seven largest economies in the world by gross domestic product (GDP) and five of the eight most populous countries.

Intra-regional product exports have been on the rise in recent years, up from 55 per cent in 2012 to 57.1 per cent in 2015.

Likewise, intra-regional product imports have also been creeping up, from 61.5 per cent in 2013 to 62.4 per cent in 2015.

This can only mean that Asian markets are becoming increasingly attractive to investors and organisations, and that markets outside of Asia have become less attractive.

With what is currently transpiring in the world around non-trade barriers, tariffs and protectionism, it is likely that the proportion of intra-Asian trade will continue to grow.

Some challenges

Despite being an attractive market, Asia is still relatively under-developed.

Japan's Mizuho Research Institute says that the region will need a US$6.5 trillion (NZ$8.9t) injection into its infrastructure investment between 2015 and 2020. About US$3.1t will go into electricity and US$ 2.1t will go to roads.

But debt is already at high levels in some Asian countries. A major challenge is to encourage private sector participation in infrastructural projects.

With prosperity comes rising costs. Property markets are on the rise, and worse still are the rising food costs.

Vegetable prices in particular have been rising at phenomenal rates. They have risen at close to 20 per cent year-on-year in North Asia countries.

The aging population creates another concern, especially with regard to the healthcare bill.

It is estimated that Asia will need to foot a US$20t healthcare bill in the period from 2015 until 2030.

Annual healthcare expenditure in 2030 is expected to be five times its 2015 levels, due to the increasingly ageing population (200 million are expected to reach 65 years of age in the next decade) and rising medical costs.

Asia: defying our understanding of developed markets

There are close to 50 countries in Asia. We should also recognise that there are sub-regions to be considered within massive markets like China, India and Indonesia.

But the structure of each market is complex. For example, while the Philippines and Indonesia are experiencing high economic growth, they have less internet connectivity and are in fact ranked lower in ease of doing business compared to markets like Thailand and Malaysia, though the latter two fetch lower economic growth.

Such complex relationships will necessitate a more focused approach in analysing any Asian markets, as they do not behave according to our conventional understanding of developed markets.

There is a high likelihood that as these markets become developed, they will never adopt the same structure that we see in the developed countries in the current era.

Attractive, competitive, and hard to understand and unlock are but a few of the themes surrounding Asian markets.

ANZ Banking Group's recent exit from five Asian markets in the wealth and retail businesses is a testimony to these themes.

Published on stuff.co.nz