Asia’s Economic Outlook for 2024

By Edmond Lococo and Lena Tsao

Even as Asia-Pacific faces regional headwinds, the area is expected to be the fastest-growing region of the world economy in 2024, if at a slower pace than expansion seen in 2023.

The outlook is for continued resilient expansion in the APAC region, with robust domestic demand in many Asian emerging economies, including mainland China, India, Indonesia, Philippines, and Vietnam supporting economic growth momentum, according to S&P Global Market Intelligence.

Despite a slowing China, Asia will continue to drive global growth. Asia-Pacific growth is forecast between 3.5 percent and 4.0 percent in 2024, compared to a forecast of 4.5 percent in 2023, according to Cushman & Wakefield. Although slower, this growth outlook still remains stronger than other regions, as Euro zone growth is forecast at 0.9 percent and US growth at -0.3 percent, according to Cushman & Wakefield. Asia’s contribution to global economic growth will rise. China’s economy will remain difficult to ignore from a growth perspective, while smaller emerging markets in the region provide the best opportunities to tap into catch-up growth.

This positive outlook for the APAC economy is supported by a number of factors. Continued strong expansion in domestic consumer markets in large APAC economies, notably mainland China, India and Indonesia, will be an important factor supporting further growth in intra-APAC trade in raw materials, intermediate goods and final manufactured products, according to S&P Global Market Intelligence. Sustained economic growth is driving rapid growth in per capita GDP in many of Asia’s largest emerging markets, helping to boost demand for a wide range of goods and services in Asian consumer markets.

An important strength for many APAC industrial economies is their global competitiveness in the electronics manufacturing supply chain. Electronics production is an important part of the manufacturing export sector for many Asian economies, including South Korea, mainland China, Japan, Malaysia, Singapore, Philippines, Taiwan, Thailand and Vietnam. India is also rapidly building up its electronics manufacturing sector. Furthermore, the electronics supply chain is highly integrated across different economies in East Asia.

APAC auto manufacturing hubs are also benefiting from the global transition to electric vehicles, which is driving demand for EV exports produced in mainland China, Japan and South Korea, according to Economist Intelligence. Indonesia has also benefited from strong foreign direct investment flows from multinationals to build new nickel smelters and electric vehicle battery plants.

The APAC tourism industry is also expected to continue to recover during 2024, as international tourism flows normalize to pre-pandemic levels in many countries.

In India, private investment appears to have turned around after a prolonged seven-to-eight-year slump. Most of the fundamentals for a good growth story are in place. The government is on track to reach its 5.9 percent deficit target, the India Department of Economic Affairs has said, but more stimuli may be forthcoming ahead of national elections in 2024.

In Japan, an equity market rally continues. The Japanese stock market came booming back last year, with the Nikkei Stock Average rising to a fresh 33-year high. The more-than-28 percent rally is expected to continue in 2024, on the back of moderate inflation, higher wages, steady foreign inflows, strong corporate earnings and corporate governance reforms, according to analyst estimates in a Reuters poll.

Southeast Asia is an emerging green industry power. Diversification of global value chains away from China has been a significant catalyst in raising the profile of Southeast Asia, where the cost advantages make it a natural alternative to Chinese green products, according to Economist Intelligence. Areas that will gain momentum also include battery-making and EV parts. ASEAN hopes of developing their green industries are not without challenges, however. Trade and regulatory actions will be a risk for ASEAN, and not just China. Southeast Asia will make important inroads in developing its green manufacturing base in 2024 but competing with Chinese products will be a long journey.

Tech momentum is also driving growth in the region. Chip shares surged in 2023 due to ChatGPT’s success and now the spotlight is on TSMC and Samsung. The challenge lies in proving that AI demand is translating to an earnings boost. U.S.-China demand is crucial for sustained optimism. Korea’s November gains hint at semiconductor upturn. APAC is positioned to pull ahead in the AI race: 30 percent of the region’s organizations will benefit from AI in 2024, Forrester predicts.

While the region’s growth outlook still remains strong, it is not without significant challenges.

U.S. China relations remain a question mark, with many potential flashpoints ahead. Elections in Taiwan, territorial disputes in the South China Sea and competition over technology all pose risks to the region’s growth, while the biggest wild card of all may be who wins the White House, according to the Center for Strategic & International Studies.

The run for the White House is not the only campaign that will impact growth, as the Asia-Pacific region is set for a democratically decisive year as tens of millions of voters in several countries will head to the polls to pick new governments and leaders. Starting in the first week of January, parliamentary and presidential elections will be held in seven places across the world’s most populous continent – India, Indonesia, South Korea, Pakistan, Bangladesh, Taiwan and the Solomon Islands.

Structural problems in China’s economy pose another challenge. China’s nominal gross domestic product growth will be “constrained,” and its property market remains challenged, Morgan Stanley said. China’s deflation pressures have worsened in recent months. The consumer price index for November recorded its biggest drop in three years. More ominously, the producer price inflation has remained negative for more than a year. If prices continue to fall, consumers and businesses will likely put off buying and investing in anticipation of further price declines. A deflationary spiral could lead to lower production, falling wages, and rising unemployment.

This has caused private sector confidence to stay low. Low confidence in a sustained recovery was expressed repeatedly by economists, business leaders, and working people in China, Peterson Institute for International Economics wrote in a research report. Chinese consumer confidence remains at a historic low and households continue to park savings. In the meantime, confidence among private entrepreneurs remains muted following intense regulatory campaigns and crackdowns. Business fixed-asset investment remains weak. One big question for 2024 is whether the private sector will respond to government pronouncements or whether renewed confidence and investment will only flow from bolder policy moves.

While the challenges are real, the Asia Pacific region still looks to offer a bright spot in global economic growth for 2024.

For the outlook on issues that could affect your business — this year and in the long-term — read our 2024 trends series on ICR Insights.