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Asian Economy: Overview, Growth & Development

Slowing Indian economy weighs on insurance and reinsurance sectors

Slowing Indian economy will weight on insurance premium growth over the next two-three years, Moody’s Investor Service said on Tuesday. However, supportive measure taken by the regulator Insurance Regulatory and Development Authority of India (IRDAI) will help counterbalance the deteriorating economic environment.

“India’s GDP (gross domestic product) growth weakened to its slowest rate in five years in the fiscal year ended March 2019, and the resultant financial pressure on rural households amid weaker job creation is in turn also weighing on premium growth,” said Moody’s Senior Vice President Benjamin Serra.

According to the latest estimates by Indian statistics department, the economy will grow at 5 percent in the current fiscal ending in March, slower than the 6.8 percent growth recorded in 2018-19. GDP growth fell to a six-and-a-half-year low in the quarter ended September.

However, low insurance penetration rates in India also suggest there is still ample room for growth. According to Moody’s health premiums are likely to increase due to the government’s Ayushman Bharat scheme that was launched in September 2018. Billed as the world’s largest health assurance scheme, Ayushman Bharat aims to provide free health insurance of ₹5 lakh per family to nearly 40 percent of the population–more than 100 million poor and vulnerable families each year.

“Nevertheless, the country’s low insurance penetration rate suggests ample room for further growth, while supportive government and regulatory initiatives are also helping mitigate the currently challenging environment for Indian insurance and reinsurance companies,” Serra said.

Here’s why China won’t overtake the US as the largest economy

We’ve reached peak globalization, says Capital Economics — “In fact, a period of de-globalisation is increasingly likely.”

The group’s economists, in a note on Monday titled, “The world in 2050: where and why the consensus may be wrong,” wrote that the fallout would hit emerging economies the hardest.

“A rollback of globalisation would counteract any technology-driven pick-up in productivity growth over the next decade or so,” says Neil Shearing, group chief economist.

The takeaway: “The widespread assumption that China will overtake the US as the world’s largest economy is likely to be proved wrong.”

Market watchers have predicted the boom in China’s economy as an unstoppable Goliath that will soon leapfrog the US to the No. 1 spot. Standard Chartered last year predicted that the US in 2020 would lose its crown, saying it’s unlikely to ever become the most powerful economy again once it slips behind. By 2030, the bank said at the time, Asian Gross Domestic Product (GDP) will account for about 35 percent of global growth, up from 28 percent in 2018 and 20 percent in 2010.

That optimism has fizzled, Capital Economics said. The promise of new technologies driving productivity growth may happen, but be “unevenly spread.”

Japan exports shrink for 13th month

The 6.3 percent year-on-year fall in exports was worse than a 4.2 percent decrease expected by economists in a Reuters poll. It followed a revised 7.9 percent year-on-year decline in the previous month, the Ministry of Finance (MOF) data showed on Thursday.

Analysts and policymakers say a preliminary trade deal agreed between the United States and China last week and progress on Britain’s exit from the European Union would help ease worries over global trade, a key driver of Japan’s economy.

Yet, the latest data showed only a modest slowing in the pace of contraction and suggests a sure-footed recovery may be months away.

“Exports are likely to bottom out around this spring,” said Takeshi Minami, chief economist at Norinchukin Research Institute, citing a pick-up in global semiconductor demand.

A rush in shipments ahead of the Lunar New Year holidays may have helped ease the export slowdown last month, he added, suggesting there may be a further contraction in January.

“Shipments are unlikely to serve as a main engine of growth this year due to the economic slowdown in the United States and China,” Minami said.

Bank of Japan policymakers have argued that solid domestic demand should help offset weak shipments and manufacturing activity.

On Tuesday, the BOJ nudged up its economic growth forecasts and sounded cautiously optimistic about the global outlook, though it said ongoing risks meant it was way too early to consider scaling down its massive stimulus.

By region, exports to China, Japan’s largest trading partner, grew 0.8percent in the year to December, led by demand for chip-making equipment, cars and plastic. It was the first annual increase in 10 months.

Shipments to the United States, the country’s No. 2 trading partner, fell 14.9 percent year-on-year in December – a fifth straight month of falls – dragged down by cars, car parts and airplane motor engines, the MOF data showed.

Exports to Asia, which accounts for more than half of Japan’s overall shipments, decreased 3.6 percent in the year to December, it showed.

BOJ Governor Haruhiko Kuroda said on Thursday the progress in U.S.-China trade talks and Brexit helped ease risk sentiment, but added that uncertainty remains on the trade relations between Washington and Beijing.


Economic success underpins literary boom in Vietnam

Against the colorful backdrop of Vietnam’s Tet (Lunar New Year) holidays in late January, there is plenty of evidence of rising consumerism among the country’s burgeoning middle class. Hanoi’s Doi Moi economic policy reforms from the mid-1980s were intended to drive a shift toward a socialist-oriented market economy. What emerged was a distinctive blend of capitalism and socialism, with growing focus on entrepreneurism and material success. One surprising trend, however, has been the revival of interest in Vietnamese literature — evidenced by the crowds in bookstores buying books as new year gifts.

Less than 30 years ago, Vietnam was among the poorest countries in the world — a time when, Vietnamese friends tell me, life was a hard scrabble and even basic goods were scarce.

In the past two decades, the country has averaged annual economic growth of 6.7 percent, according to the World Bank. Its middle class is now among the fastest growing in Southeast Asia, with more than 45 million people lifted from poverty between 2002 and 2018. On the crowded streets of Hanoi and Ho Chi Minh City, signs of prosperity range from new SUVs to gleaming office buildings, luxury apartments and high-end boutiques such as Gucci and Prada.

Chinese travel woes squeeze Thai economy as a latest virus spreads

Thailand’s economy faces a new hurdle: A virus in China that threatens to squeeze its key tourism industry during a peak travel period.

As hundreds of millions of Chinese prepare to travel for the Lunar New Year holidays this weekend, concern is mounting that China will not be able to slow the spread of the pathogen — part of the coronavirus family — that first emerged in the city of Wuhan. It has since been detected in people in Japan, Thailand and other parts of China.

Thai authorities have set up temperature detectors at airport arrival gates for flights from Wuhan. Preventing a wider spread that would spook holidaymakers is crucial for the Asian nation, since tourism accounts for about a fifth of its economy.

Eager to travel as their incomes rise, Chinese tourists have become the biggest spenders in Thailand, accounting for about 30 percent of tourist receipts last year, according to government data through November. For its part, Thailand has eased visa rules for Chinese tourists, making applications available on arrival and online, and cutting the price.

HSBC: Indonesia, Southeast Asia enter golden age of economy

Despite the forecast of slow global economic growth in 2020, Southeast Asia, including Indonesia, is expected to enter an economic golden age that will take the region well on the path to become the world’s fourth-largest economic bloc in the next decade.

HSBC Private Banking’s chief market strategist for Southeast Asia, James Cheo, said he is convinced the region could ride out the current global slowdown and soon catch up with the world’s economic powerhouses.

“The most exciting story, if we look at the next decade, is Southeast Asia. The next ten years could very well be the region’s golden age because if it continues to grow, say, at its current pace, it can become the fourth largest economic bloc, behind the US, Europe and China,” Cheo said to the Jakarta Globe.

Cheo pointed out there are at least three supporting factors behind Southeast Asia’s economic rise. First is the demographic bonus that many countries in the region are already enjoying.

“Sixty percent of Southeast Asians are under the age of 35. In the next ten years, they will come of age: they’ll start working and get their first paycheck. They will increase their purchases. They’ll buy cars. They’ll get married and buy a house. They’ll have kids and spend more money on education, and of course, they’ll travel to see the world,” Cheo said.

Second, urbanization is getting more widespread in Southeast Asia, not only in big metropolitans but also in second-tier cities.

The third is the fact that Southeast Asia is “more digital” than the rest of the world. Southeast Asians spend an average of four hours on their mobile phones every day, much longer than people in other areas of the globe. “There are around 360 million mobile phone users in the region, but still only half use them to make transactions. There’s a huge opportunity here as well,” Cheo said.

‘Substantial conclusion’ reached between Singapore, New Zealand and Chile on digital economy partnership

Singapore, New Zealand and Chile are a step closer to an agreement aimed at advancing digital trade.

Trade and Industry Minister Chan Chun Sing announced on Tuesday (Jan 21) that negotiations on the Digital Economy Partnership Agreement (DEPA) have reached a substantial conclusion – meaning most of the points have been settled.

Mr Chan said the wording of the agreement would be refined, adding that the three countries were targeting for a formal signing in time for the next Asia-Pacific Economic Cooperation (APEC) Ministers Responsible for Trade meeting, which is expected to be in April this year.

He was speaking to reporters during a press conference in Singapore, together with New Zealand’s Minister for Trade and Export Growth David Parker and Chile’s Vice Minister for Trade Rodrigo Yanez.

Hong Kong protesters mull tactics

A sharp dip in the frequency and ferocity of Hong Kong’s pro-democracy protests has raised questions over the future of the leaderless movement, rattled by a spike in arrests and increasingly aggressive police tactics.

At a recent rally in the heart of Hong Kong’s financial district, 36-year-old clerk Freesia held mixed emotions.

Like so many Hong Kongers, he has spent much of the last seven months risking injury and prosecution by attending protests pushing for greater democracy and police accountability.

But after 7,000 arrests and little sign of Beijing making any concessions, he wondered whether it was time for a change in tactics.

“We have to think of another way to fight for democracy instead of purely relying on street protests,” he told AFP, waving a flag with the slogan “Liberate Hong Kong, revolution of our times”.

“If we continue our fight against the police on the streets, Hong Kong people beating Hong Kong people, this will pose no threat to Beijing.”

Similar debates are now raging on online forums, in cafes, bars and across dinner tables – how does Hong Kong’s democracy movement stay alive?

The last seven months have radically changed the global business hub.

The city is more ideologically divided than ever, its government and police force are loathed by swathes of the population, and the economy is in recession.

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