The Return of Asian High Growth?

Buried in the business section of the New York Times on Thursday, after pages of encomiums to George Steinbrenner, was a story that should have gotten more attention: Singapore’s economy may expand by as much as fifteen percent this year. Fifteen percent. For those who are counting, that’s about four times the projected growth for the United States, and a rate that Greece’s leaders probably would sell the rights to the Parthenon to attain.

In fact, much of South and East Asia appears to be returning to extraordinary high growth, making it the only engine of the global economy still firing. Indonesia is projected to grow by nearly six percent, while China may grow by 10.5 percent and Taiwan by nearly eight percent, among other examples of the regional trend.

But one must still question whether these growth rates truly show a fundamental shift in Asian economies, a shift informed by the global economic downturn. In many major East and South Asian economies, leaders over the past two years have repeatedly paid lip service to the idea that they must rebalance growth to depend less on exports and more on other drivers, including domestic consumption.

But their success in doing so has been decidedly mixed, despite the rosy figures for this year. In Thailand, where the government of Abhisit Vejjajiva wants to keep growth numbers up and also mollify poor rural Thais, the government has stepped up populist spending over the past year, resulting in bloated budgets that, in theory could help spark greater consumer spending but in reality are not targeted effectively enough to do so. Indonesia and the Philippines, two countries with sizable populations that could dramatically benefit from increased domestic consumption, have not demonstrated real government will to do so. ASEAN has used the crisis as an excuse to slow down the process of real inter-regional economic integration, which would help create a regional market that would take some of the pressure off of export sectors. China, where the government has frantically rolled out incentives to boost domestic spending, has taken strides toward rebalancing the economy, and a stronger RMB will give Chinese consumers more purchasing power, but Chinese consumption as a percentage of GDP is still lower today than it was a decade ago, and until the government can dramatically reduce peoples’ savings, it will have a hard time sparking the kind of consumer spending the economy needs. Even Singapore, which has smartly diversified by adding casinos (okay, “integrated resorts,” in Singapore-speak) to attract more tourists, may find this unsustainable, since so many other Asian nations are also looking to open up casinos to get a piece of the regional gambling market.

Certainly, the fact that Asia is growing rapidly now is nothing to denigrate, and many Western leaders would love projections like Singapore is boasting. But for Asia to really take its place as the primary driver of global growth, for a true seismic shift to occur, there is some way to go in rebalancing the composition of Asian economies.