all you need to know
In its 2021 regional report, the IMF was bullish on Asia. The fund predicted a strong rebound, driven by returning global demand for Asia’s exports, particularly its manufactured goods. IHS Markit predicts that Asian export volumes will increase by 13% in 2021. As a result of this trade boom, the IMF forecasts growth for the Asia Pacific region of 7.6% in 2021 and 5.4% in 2022. This is well above the predicted global growth rates of 6% in 2021 and 4.9% in 2022.
However, the picture is not as uncomplicatedly optimistic as these headline figures indicate. In the summer of 2021, the IMF released an updated report in which it downgraded the outlook for some Asian economies, particularly what it referred to as “emerging Asia”. Composed of countries such as India, Indonesia, Thailand, and the Philippines, emerging Asia suffered a bruising second wave of COVID-19 infections in the March through May period of 2021, denting its growth prospects.
The World Bank echoes these findings, pointing out that only China and Vietnam have enjoyed the anticipated
“V-shaped recovery”. It also pointed out that, because of the economic distress caused by the pandemic, in 2020 poverty levels in the Asia Pacific region stopped declining for the first time in 20 years. As a result of this, 22 million people who might otherwise have escaped poverty did not.
Another potential constraint on growth is the rapid increase in shipping costs which has been a feature of 2021.
In May 2021, the cost of hiring a shipping container for transport from Asia to Europe hit US$10,000 for the first time. Between the end of April and the beginning of August, Asia-Europe shipping prices rose by an average of US$6,000 per container.
The same phenomenon is evident on other routes. Shipping costs on the Shanghai to Los Angeles shipping route, for instance, also hit almost US$10,000 a container on 15 July. Some retailers are already predicting significant price increases for Asian consumer goods in time for the festive season. It’s possible that this, combined with falling consumer confidence due to post-vaccination COVID spikes, could hit demand and depress sales.
As with other parts of the world, Asia has been hit by rising infection rates since the advent of the Delta variant of COVID-19. By the start of August 2021, Bangladesh, Malaysia, Pakistan, Thailand, and Vietnam were all experiencing sharp rises in infection rates. In some countries, this rise in infections has been accompanied by a rise in hospitalisations and deaths. By the start of August, death rates in the region were close to 5,000 a day, a rise from just 800 a day in March 2021.
The potential for a strong recovery in Asia is clearly there. This was evident in early 2021, before the arrival in force of the Delta variant. The primary problem appears to be the region’s low vaccination rate. Less than 10% by August 2021, compared to around 40% in North America and Europe.
Quick facts about the region
Asia is booming. There are many bumps on the road to mass prosperity. But with thriving digital and manufacturing economies, Asia looks set to continue growing and diversifying its economy long into the future. And that can mean only greater consumer demand, which equally must mean more e-commerce. If you’re an e-commerce merchant looking for lucrative new markets, look east.