The Future of Emerging Asia

December 2021

Emerging Asia has been one of the most exciting regions in emerging markets during the last two decades and this trend is expected to continue, though the pace of growth has slowed down as the economies transform and mature. By 2040, emerging Asia will account for almost a third of global GDP and more than a quarter of consumer spending, highlighting huge opportunities for business and investors. Risks will remain, requiring business to be agile to identify sweet spots and overcome challenges.

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Key Findings

Emerging Asia to remain most significant growth region globally

Emerging Asia is the world’s most economically dynamic region, and is set to remain on a robust, though slower, growth trajectory in the decades ahead, based on strong economic fundamentals. GDP will more than double by 2040, thereby gradually reducing the gap to advanced economies.

China is set to drive the region’s ongoing economic rise, but opportunities also exist in smaller markets

China will remain the dominant driver of economic growth in absolute terms, with its economy set to become the world’s largest by around 2030. Smaller emerging Asian economies, including India, Indonesia, Vietnam, Thailand and the Philippines, also provide significant opportunities, with their economic transformation and expanding consumer bases.

Productivity to remain key to boosting growth

Potentially mitigating factors on economic growth in the decades ahead are slow productivity growth, due to skills shortages, and insufficient infrastructure expansion. In addition, with emerging Asia comprising coastal and island countries, the region will face growing risks associated with climate change.

Consumer markets to see transformation amid increasing living standards and urbanisation

Steady economic growth will lead to substantial increases in the consumer class and the number of middle-income households. Although the lower income segment will remain significant, shifts in spending patterns and the rise of new consumer segments will create opportunities in a wide range of sectors.

Businesses should capture high-growth opportunities and leverage intra-Asia linkages

High-growth opportunities will continue to emerge for companies and investors, driven by emerging Asia’s growth, rising innovation capacity and increasing regional linkages. Despite potential volatility, a regional presence allows profit-yielding access to fast-growing consumer markets and production networks.

Scope
Key findings
Growth has varied significantly among emerging markets
Emerging Asia to remain a strong performer, offering significant opportunities
Emerging Asia is rebounding from the pandemic, facing challenges ahead
Emerging Asia will continue to lead global economic and consumption growth
The four long-term drivers of Asian emerging markets
Growth models are shifting to more services-driven, but manufacturing remains important
India and the Philippines to see strongest GDP growth rates over the period to 2040
Consumer class expands strongly, living standards are catching up
Consumption still lags behind GDP expansion, underlying growth potential
China’s economy sets to double by 2040
China is shifting to a consumer-driven, innovative economy
Challenges: demographics, geopolitics and decarbonisation
A booming consumer class and a stronger focus on equality
Implications for business
Examples of businesses capitalising on China’s future growth
India predicted to have an USD8 trillion economy by 2040
Growth driven by favourable demographics, enhanced investment and urbanisation
Challenges: boosting infrastructure investment and upskilling the labour force
India’s consumer class to expand strongly, but income levels remain relatively low
Implications for business
Examples of businesses capitalising on India’s future growth
Indonesia’s economy to grow twofold by 2040, entering the global top 10
A young, digitally-orientated population and private consumption drive Indonesia’s growth
Limited productivity and trade competitiveness to remain economic headwinds
Consumption patterns expected to evolve in view of rising Indonesian middle class
Implications for business
Examples of businesses capitalising on Indonesia’s future growth
Philippines’ GDP to surpass Thailand’s
Growth drivers: favourable demographics and a booming services sector
Middle-income segment expands, but inequality still a hindrance to greater prosperity
Implications for business
Examples of businesses capitalising on the Philippines’ future growth
Thailand likely to see the lowest growth rates in emerging Asia
Thailand’s goal to become a high-income country remains challenging
Sustained expansion of the consumer class; number of older consumers to rise
Implications for business
Examples of businesses capitalising on Thailand’s future growth
Vietnam’s economy will double in size by 2040
Future growth driven by favourable demographics and growing manufacturing
Challenges: low productivity, export dependence and decarbonisation
Strong rise in consumer class and living standards
Implications for business
Examples of businesses capitalising on Vietnam’s future growth
Emerging Asia in 2040
Strategies for companies to win
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