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Asia Forecast Medium-Term Forecast on Asian Economies (December 2017 Issue / 2017-2030)

Digital Asia 5.0

- Innovation changes economic power relationships

Research Director:Masashi UEHARA
  Principal Economist
Deputy Director:Kengo TAHARA
  Principal Economist
Hiroyuki MOTEGI Economist
Kazuya MANABE Trainee Economist


The Japan Center for Economic Research released its third Medium-Term Asian Economic Forecast for 2017 through 2030. It covers 11 key Asian markets: China, India, the NIEs (South Korea, Taiwan, Hong Kong and Singapore), and the ASEAN5 (Indonesia, Thailand, Malaysia, the Philippines and Vietnam). Japan and the U.S. are also included for the sake of comparison.

Since the end of World War II, Asia has experienced numerous upheavals, from regional wars to economic crises. While the engines of growth have shifted time and again, the Asian economy as a whole has steadily expanded. The main growth drivers have adapted their industrial structures to new innovation, such as information technology devices, and expanded their economies by exporting new equipment and devices to advanced countries, especially the U.S.

After the Asian currency crisis in 1997, the PC and mobile phone industry helped China establish a dominant position in manufacturing. We call this period Digital Asia 4.0. And now, we see the region moving into a new era: “Digital Asia 5.0.” Led by the proliferation of smartphones, digital technologies are spreading into a host of industries and transforming lifestyles.

China slows to 2.8% growth in 2030 despite high productivity

The forecasts were compiled on the assumption that their ability to adapt to innovation, including digital technology, will have a significant influence on their economic trajectories.

The high growth group will include the Philippines (6.4% in 2030), India (5.2%) and Vietnam (5.0%) over the next 10 years. China, which had nearly the same growth rate as India in 2016 — 6.7% — will slow down to 2.8% in 2030. Although China can count on high productivity growth, its capital stock adjustment is more advanced.

India’s GDP will surpass Japan’s in 2028 to be world’s No.3

Although China’s growth rate will decelerate toward 2030, its economic scale, which was about 60% of the U.S. in 2016, will approach 80% by 2030. But like Japan, which approached 70% of America’s scale in the mid-1990s, China will not be able to catch up with the U.S. — though it will get closer than Japan did at its peak.

China will remain the second-largest economy, well ahead of Japan. In fact, it will be 4.4 times larger than Japan, widening the gap from 2.3 times in 2016. China can be expected to continue accounting for about half of Asia’s growth in the coming years.

But India is set to take over China’s role as Asia’s main growth driver in the 2030s. India, whose economy was equivalent to about 50% of Japan in 2016, will surpass Japan in 2028 and be 1.2 times larger in 2030. Now the world’s seventh-largest economy, India is poised to move into third place.

There are other looming shifts in economic power: Indonesia will catch up with South Korea around 2030. The Philippines will overtake Thailand in 2027 and also Taiwan in 2029. Malaysia will widen the gap with Singapore, and Vietnam will overtake Singapore in 2027. The center of gravity in Asia is shifting from the east to the south — India and ASEAN — both in terms of population and economic size.

As for per capita income, Malaysia will become a high-income country in 2023, with nominal GDP per capita over $12,000. Two years later, China will also become a high-income country. But China will not catch up with Malaysia by 2030. Thailand is likely to fall short of high-income status.

Indonesia will be an upper middle-income country in 2019, with GDP per capita of over $4,000. The Philippines will reach that level in 2022, with Vietnam following in 2028. The Philippines will overtake Indonesia in 2029. India will not yet reach the upper middle-income level despite its fast growth. Singapore will be the only Asian state to catch up with the U.S., widening the gap with Hong Kong and Japan. Hong Kong will pull further ahead of Japan, with South Korea gaining ground from behind.

Figure: Economic scale of Asian economies (Nominal GDP in market U.S. dollars)

Asia Mid Forecast2017

This Asian Economic Forecast was reported on the Nikkei Asian Review on December 7, 2017.


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