Asia’s economic growth will likely slow in 2011 but still remain strong over the medium to long term due to powerful fundamental drivers, according to Fidelity Investment Managers.
The region’s gross domestic product (GDP) may cool to around 8 per cent in 2011, versus 9 per cent expected this year, Fidelity Asia Fund portfolio manager David Urquhart said.
He said there were still a number of strong trends in place that would all likely support multi-year growth in the region.
“There are some really powerful forces that are delivering strong GDP growth in Asia and more broadly into the emerging markets and these continue to be on track,” he said in Sydney yesterday.
“Things like demographics – we are seeing growing populations, the fact that they do have lower wages and that they have cost advantages versus developed markets, and we are seeing market share gains by a lot of the companies there.
“We are seeing job creation, wages are going up and we are seeing a virtuous cycle come through for a lot of the economies and even the global financial crisis was not able to derail any of these.”
He also said the growth in trade within Asia is also becoming a powerful driver.
But Asia’s success has meant the region faces problems with inflation.
“There are some risks arising and part of that is due to their success – they’re now having to worry more about inflation,” he said.
“The Asian economies are unlike Australia, which is well ahead of the curve here. The Reserve Bank has moved very aggressively to move rates up back to neutral.
“Asia still has a large chunk of that ahead of them and they are still grappling with how to not disadvantage exporters and encourage demand still to be positive, but without trying to manage inflation.”
