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Symposium 2014

Investing in Asia – Cyclical or Structural Growth Slowdown?

The Challenge

For over a year, the economic outlook and growth prospects in emerging markets, particularly in Asia, have failed to meet expectations. Indeed, it now seems that emerging markets deceleration is becoming conventional wisdom among economists and market participants. It remains unclear whether all emerging markets will match the most developed countries in our lifetime. Many emerging markets face substantial headwinds to growth, ranging from governance issues to credit excesses. In most of Asia, credit intensity – the amount of debt needed to create one unit of economic growth – has risen sharply over the past few years, suggesting that the pattern of using debt to fund growth is not viable. Meanwhile, countries with large current account deficits may fall victim to sudden capital outflows. In the short-term, the greatest threat does not come from an external balance-of-payments shock, but stems from domestic credit risk. Longer-term, the key question is whether the growth slowdown is transitory or not. Those who believe it is cyclical argue that growth will soon pick up in conjunction with the (slow) improvement in developed markets. Those who think the deceleration is structural argue that much-needed structural reforms will not be implemented because they collide with the vested interests of the elite.

Is the situation that clear? Is it clearly structural or cyclical or is it a confluence of various factors? Asian countries assert that they can avoid a full-blown crisis because they now have flexible exchange rates, sounder banking systems, and do not have large debts denominated in USD. Is this sufficient? What are the “second-generation” reforms most needed to spur equitable and sustainable growth? In terms of development, what matters most – the level or the rate?

    Background Paper

    Background Paper
    Symposium 2014

    Investing in Asia

    In 2012 America’s intelligence agencies forecasted that Asia would soon be carrying more weight in the world than at any time since 1750. It is predicted that by 2030 Asia will have surpassed North ...

    In 2012 America’s intelligence agencies forecasted that Asia would soon be carrying more weight in the world than at any time since 1750. It is predicted that by 2030 Asia will have surpassed North America and Europe combined in terms of global power, based upon GDP, population size, military spending and technological investment.

    Polity, Academia, Business, Civil Society

    Virtual Library

    Virtual Library File
    Symposium 2014

    Asset Manager Intentions: Asia

    Asian markets offer enormous potential rewards, but they are notoriously difficult to penetrate without forging local alliances. This FT report looks at the various challenges and uncertainties asset ...

    Asian markets offer enormous potential rewards, but they are notoriously difficult to penetrate without forging local alliances. This FT report looks at the various challenges and uncertainties asset managers and investors face and must grapple with as well as opportunities these trends present in countries such as China and Japan as well as frontier Asian markets.

    Virtual Library File
    Symposium 2014

    The trouble with emerging markets

    Looking beyond the recent turmoil that hit emerging markets (EM), the pundit argues that many of them are in real trouble. In his opinion, long-term optimism about EM is warranted. However, in the nex ...

    Looking beyond the recent turmoil that hit emerging markets (EM), the pundit argues that many of them are in real trouble. In his opinion, long-term optimism about EM is warranted. However, in the next few years, they face numerous headwinds and have to deal with complex policy trade-offs.

    Virtual Library File
    Symposium 2014

    To See the Problem of Emerging Markets, Look to Turkey

    Morgan Stanley’s head of global macro says that Turkey crystallizes the three critical flaws of emerging markets: rising indebtedness, large current account deficits and stale political regimes. He ...

    Morgan Stanley’s head of global macro says that Turkey crystallizes the three critical flaws of emerging markets: rising indebtedness, large current account deficits and stale political regimes. He observes that when well-informed locals flee (as they are doing at the moment in Turkey), this is an unmistaken sign that trouble is brewing. (Financial Times, March 2, 2014)