According to estimates by Oxford Economics, 8 growth in real disposable personal income in China is estimated to have fallen from an average annual rate of 11.4 percent per year in 2010–2014 to 7.0 percent in 2015–2019.
Slowing GDP growth, along with its impact on labor markets, has weighed on income growth in key economies in the region.
Given that GDP growth is unlikely to swing up sharply in 2020, improvement in labor-market conditions will likely only be gradual. And in countries such as Malaysia, although unemployment has held steady of late, the figure is relatively higher than in the first half of 2010–2019. Unemployment has picked up, albeit slowly, in South Korea since August 2019. 7 In China, employment growth has been steadily declining since 2015-in fact, employment contracted by 0.1 percent in 2018. In India, for example, unemployment was 7.7 percent in December 2019 from a low of 3.8 percent in July 2017. Slowing growth in key economies has impacted labor markets there. Income growth has slowed in major economies While Japan is still struggling despite years of quantitative easing to escape deflationary pressures, trade tensions have weighed on South Korea’s economy (figure 1). The trend is similar for Malaysia.įor developed markets such as Japan and South Korea, growth is unlikely to pick up sharply this year.
6 Economic activity has also lost momentum in Indonesia, a key Asian market, with growth slowing from an average of 5.8 percent per year in 2010–2014 to an estimated 5 percent in the following five years. In India, disruptions due to demonetization, introduction of a goods and services tax, and deterioration in banks’ asset quality have pushed growth down to an estimated 4.8 percent in 2019 from 8.2 percent in 2016. Specifically, growth in China has been slowing steadily-by more than 4 percentage points over 2010–2019-and is expected to decline further this year as the economy matures, credit-fueled expansion slows under the weight of rising debt, and trade tensions with the United States add to uncertainty. Overall, the region’s estimated growth in the last five years of the decade (6.4 percent) is lower than in the first five years (7.6 percent). 4 Emerging and developing economies 5 in the region grew by an estimated 5.6 percent in 2019, down from a 6.4 percent rise in 2018. This trend is likely to continue into 2020, according to estimates by the International Monetary Fund (IMF). Strong growth due to fiscal and monetary sops in the earlier part of the last decade-to overturn the worst effects of the Great Recession-has given way to slower, yet likely more sustainable, growth in Asia. In that case, central banks will be forced to raise interest rates, thereby pushing up the cost of borrowing and repaying debt for consumers. Consumers in many parts of the region are enjoying low interest rates, 3 but if tensions in the Middle East escalate, crude prices will likely rise, causing inflation to flare up. And with household debt high in some economies, any decline in income growth will only add to consumers’ woes. Until a resolution is reached, these tensions will weigh on trade and investment in Asia and likely on the region’s economic growth, labor market, and personal incomes. While there are hopes that trade disagreements among major economic powers, especially the United States and China, will get resolved, 2 it is still early days to say anything. So, what do Asian consumers need to be wary of in 2020? Economic growth and uncertainty related to international trade is a key concern.
And in the spirit of the great John Maynard Keynes, it is worth looking at these near-term risks for they may well impact the fortunes, thereby spending and investment decisions, of Asian consumers this year. While the economic outlook for Asia is favorable over the long term, with expectations of healthy economic growth, rising incomes and wealth, and an expanding middle class working in the region’s favor, 1 there are a few risks in store this year. Yet it is less of hope and more of underlying economic and financial conditions that will determine Asian consumers’ prospects in 2020. In Asia, as in other parts of the world, consumers are hoping for a better year-more jobs, more incomes, more wealth, and perhaps, less uncertainty. And any escalation of tensions in the Middle East may well topple the inflation applecart too.Īs the memories of New Year’s Eve festivities recede from people’s minds, the dreary motions of everyday life take over. In some economies, household debt is also high. In Asia, consumers are facing slowing economic growth and incomes this year.
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