Emerging Asia remains a major global growth engine, driven by factors such as a large and growing labor force, trade liberalization, economic reforms, technological advancements, and sound government policies. However, the region faces challenges from an aging population and a deteriorating global trade climate.
Demographic dividend is still beneficial for many countries, but its impact is declining due to aging populations in China and Thailand. China's labor force is shrinking, and its productivity growth is hampered by economic rebalancing and technological decoupling from the West. Thailand faces similar issues due to its reliance on tourism, high household debt, and low FDI inflows.
The global trade environment is worsening, with the US-China trade war and rising protectionism impacting supply chains. While some countries are able to mitigate the negative effects through trade diversification and friendshoring, the overall trade climate is expected to remain challenging.
In the short term, most economies in Emerging Asia are expected to maintain positive growth, supported by strong exports and monetary easing. China's growth is expected to slow further due to structural headwinds and policy measures that address immediate issues but do not solve underlying problems. India is expected to remain the world's fastest-growing major economy, driven by domestic demand and exports. The five largest ASEAN economies are also expected to show steady growth, with the Philippines and Vietnam leading the way.
In the medium term, Emerging Asia will continue to face headwinds from aging and trade tensions. However, the region is well-positioned to maintain its role as an economic powerhouse, with growth rates remaining among the highest globally. China's growth is expected to fall below 4% from 2027, while most other emerging economies in Asia will also face lower GDP growth in the longer term.
