Matthews says that while growth will be off recent peaks in the market, a forecast GDP of 7.5 per cent for Asia ex-Japan is still five percentage points greater than Japan, the UK and Europe.
Matthews points to national savings increasing five-fold as rationale for the strong outlook, particularly at a time when people in the West are struggling with debt.
Corporate debt levels have also fallen with the debt to equity ratio now below 20 per cent – compared to 80 per cent a decade ago.
The growth in Asian exports to the US has tailed off markedly in the past two years, from 18.6 per cent in March 2006 to 3.1 per cent in March 2008. However, this has been counteracted by a rise of almost 8 per cent in commodity exports, while exports to the EU have also risen by almost 3 per cent.
Matthews says that inflationary concerns do remain prominent for all markets.
“there has been an increasing realisation in some countries that inflation won’t go away quickly and governments have started to take some action by raising interest rates or through other more restrictive measures.”
“Asia’s contribution to global GDP was higher than both the US and Europe in 2007. Moreover, there is increasing breadth of investment opportunity, particularly after the large number of IPOs seen in recent years. While inflation remains a concern in the short-term, the long-term picture for the region is very positive.”