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Asian hub

Asia 2022: 5 trends to watch

Published 5 January 2022 in Asian hub • 5 min read

With vaccination rates now accelerating across Asia, the region will top the world’s growth league in 2022. IMD picks five trends to watch in the region’s key countries.


China will continue to drive innovation

China looks set to keep its zero-COVID strategy in place, and so to keep its borders closed to the rest of the world through 2022. Combined with COVID-19 measures that will continue to depress consumption of services (but not of goods – which remains robust), economic growth looks set to fall to 5-6%, according to most forecasters, down from 8% in 2021.

That, however, will not stop businesses in the country from continuing to drive innovation, especially in the areas of new retail, industrial Internet of Things and supply chain digitization, says Mark Greeven, Professor of Innovation and Strategy at IMD.

Moreover, while regulation of China’s Internet sector looks set to continue, keeping the changes in perspective is important. “I don’t see this as just a tightening,” said Greeven. “I think this is a back-and-forth process of regulatory reforms that will lead to lots of adjustments, including revisions of the new regulations, along the way for the next two to three years; the purpose is to find a way to regulate the Internet sector, and China’s ‘big tech’.” 

As Greeven noted at a recent IMD industry dialogue with senior leaders in Asia’s retail sector, “China stands at the center of world retail innovation. The revolution launched by its live-streamers, super-apps, social commerce and other new practices has only just begun.”

Japan’s economic rebound to be tempered by caution

With a new prime minister, Fumio Kishida, at the helm, Japan will see an economic rebound in 2022.

Kishida’s mandate centers on reviving the economy from its COVID-19 downturn. Stimulating growth will be a ¥56 trillion ($490 billion) stimulus package announced in November, with more funding for everything from semiconductor manufacturing and rural digitization to households and travel subsidies.

However, as IMD visiting professor Kazuo Ichijo says, “Given the cautious approach of Japanese government towards COVID-19, the economic recovery of Japan will be quite slow.”

So, while growth should rise to 3.4% in 2022, up from 1.8% in 2021, it will drop back to just 1.1% in 2023 according to the OECD’s most recent economic forecast.

Also in Kishida’s stimulus package are pay rises for civil servants and tax breaks aimed at encouraging companies to raise wages. “However, as non-Japanese are currently not allowed to enter Japan, this will have a negative impact on business development in Japan by foreign companies,” said Ichijo.

Singapore’s reopening should attract foreign firms

Singapore, after topping IMD’s World Competitiveness Rankings in 2019 and 2020, tumbled to fifth place in 2021, largely due to COVID-19’s impact on the export and import of services and on people’s mobility.

It retained its first position in Asia, however, underscoring its enduring strengths across international trade, international investment, business legislation and technological investment.

With the pandemic likely to cause further supply chain disruptions and to restrict travel and tourism, the government is forecasting economic growth of 3-5% in 2022, down from around 7% in 2021.

However, its high vaccination rate – 88% of the population – should allow the government to ease domestic and border pandemic restrictions through 2022.

Unlike in Hong Kong, where foreign executives are increasingly unhappy at the government’s zero-covid policy and its accompanying entry restrictions for non-residents, Singapore’s pledge to reopen as far as possible should encourage foreign companies to strengthen their presence in the city.

India’s recovery to be fueled by consumption

India will continue its bounce-back in 2022. After seeing its economy shrink more than 7% during the 2020-21 fiscal year (running from April to March), it is recovering the lost ground with the Reserve Bank of India expecting 9.5% growth for 2021-22 and a consensus forecast of around 7.5% for 2022-23.

With the vaccination rate set to rise strongly, and household spending returns to pre-pandemic levels, consumption will be the main driver.

“The corporate outlook for next year is broadly positive for big companies in a position to benefit from the ongoing formalization of the economy, as small players fall by the wayside,” said Tom Miller, Senior Asia Analyst at research firm Gavekal.

That in turn, will support continuing strong inflows of foreign investment. The $64 billion that arrived in 2020 was the world’s fourth biggest total, behind only the US, China and Singapore. This funding will help India integrate into global value chains, in turn encouraging still greater inward investment.

But question marks remain over the progress of structural reforms. Long-awaited land reforms have been delayed ahead of state elections next year, while a climbdown on contentious farm bills shows that Prime Minister Narendra Modi is prioritizing short-term political payoffs over long-term economic benefits. “That will dismay domestic and foreign players alike,” said Gavekal’s Miller.

Malaysia will further embrace digitalization

Malaysia will outperform the rest of Southeast Asia in 2022, with GDP growing around 6% driven by consumer demand as the economy opens up again.

Playing a key role in this expansion are fiscal stimulus packages totaling more than $90 billion and online spending.

After increasing more than 90% from 2018-20, e-commerce revenues jumped 23% year-on-year in the first nine months 2021,  according to government statistics. Further growth should take e-commerce revenues to $11 billion by 2025, the government predicts.

Pushing this expansion are Malaysia’s high Internet and mobile phone penetration rates: 80% of its 32 million population are online, and mobile subscriptions stand at more than 40 million.

“I think we’re at the brink of a really rapid shift to embracing a much more digital way of life,” said Imri Mokhtar, Managing Director and Group CEO of Telekom Malaysia, the country’s state-owned telecoms provider, at an IMD-organized virtual roundtable on Malaysia’s digital competitiveness held in November.

COVID-19 has played a major role in reshaping views, Mokhtar said, with the last two years seeing many people embrace new ways of working – first and foremost at small and medium-sized enterprises (SMEs). 


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