Asian Economies On The Rebound

THE ECONOMIST - More green shoots have appeared in America in recent weeks, but they are nothing by comparison with the lush jungle sprouting in the East. Asia’s emerging economies probably grew at an average annualised rate of over 10% in the second quarter, while America’s GDP fell by 1%. In 2009 as a whole, recent forecasts suggest that emerging Asia could grow by at least 5%, while the G7 economies contract by 3.5%. The growth gap between the two has never been wider. How have these export-dependent economies managed to decouple from the developed world? And can their recovery last?

The countries that have so far published second-quarter GDP figures show an impressive bounce. Comparing the second quarter with the first at an annualised rate, China’s GDP grew by 15%, South Korea’s by almost 10%, Singapore’s soared by 21% and Indonesia’s managed a respectable 5%. Other countries in the region are also likely to show a rebound. It is true that output in South Korea and Singapore was still lower than a year earlier, but quarterly changes are more useful for spotting turning points-and this is how growth rates are most commonly measured in America.

The revival in emerging Asia’s industrial production is even more impressive, jumping by an annualised rate of 36% in the second quarter. According to Barclays Capital, emerging Asia is the only region in the world where output has regained its level before the crisis (see chart above). This is largely due to China, where industrial production rose by 11% in the 12 months to July, but all the Asian countries have seen a strong pick-up. In contrast, up to June, America’s production continued to fall.

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