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Asia’s Next Hot Markets

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Pacific Money

Asia’s Next Hot Markets

China has been the story of late, but look to Southeast Asia over the next decade, says a new report.

China may have been the growth story of the early 21st century, but the next decade’s hottest markets are tipped to be far more exotic.

According to a report by researcher Business Monitor International (BMI), Mongolia is among five Asian nations in the top 15 economies expected to show the fastest growth over the next 10 years, with forecast cumulative real GDP growth of 114.5 percent through to 2022.

Investors with a healthy appetite for risk could consider the top three growth economies of Mozambique, Tanzania and Iraq, with the former expected to post an eye-catching 158.8 percent expansion.

Southeast Asia is also expected to host some of the world’s fastest-growing economies, helped by its growing population of 600 million and proximity to major markets. Myanmar is forecast to nearly double in size, while Sri Lanka, Cambodia and Vietnam are set to expand by around 90 percent during a period in which emerging economies become a dominant global force.

By 2022, London-based BMI expects emerging economies to hold nearly 55 percent of global GDP, up from only 25 percent in 2000. However, the developed world will still be six times wealthier on a per capita basis by 2022, at $61,662 versus $10,423 for emerging economies.

However, the BRICS will not disappear completely with China and India expected to expand by more than 80 percent over the next decade. Chinese GDP per capita is expected to reach $13,260 compared to India’s $3,339, removing millions more from poverty.

Yet according to BMI, Chinese consumption still has some catching up to do compared to the United States, with the gap still expected to amount to around 10 percent of world GDP by 2022.

Despite their explosive growth, the top 15 hottest economies will still only account for around 3 percent of world GDP by 2022, with per capita GDP remaining relatively low.

China the only BRIC?

Amid previous optimism over the future of the BRICS, economist Jim O’Neill has recently virtually disowned the acronym he created in 2001 after disappointing growth performances. Originally referring to just Brazil, Russia, India and China but later expanded to other nations, the acronym is no longer valid, the former Goldman Sachs Asset Management chairman said.

“If I were to change it, I would just leave the ‘C,’” O’Neill told the Wall Street Journal in a recent interview. “But then, I don’t think it would be much of an acronym.”

The end of the commodities boom has weighed on the BRICS, with Chinese growth slowing from its previous double-digit pace. O’Neill said he expected average growth for the BRIC economies of 6.6 percent a year through to 2020, below the 8.5 percent average of the previous decade.

Much of the forecast growth is expected to come from China, with India proving the “biggest disappointment” among the BRICS and Brazil the most volatile. Nevertheless, the economist noted that 7.5 percent growth in China would create an additional $1 trillion in wealth.

Asia growth downgraded

The Asian Development Bank (ADB) has highlighted the effects of the slowdown in China and India by cutting its growth forecasts for the region to the slowest pace in four years, amid “jitters” over the US Federal Reserve’s quantitative easing (QE) policy.

“Asia and the Pacific 2013 growth will come in below earlier projections due to more moderate activity in the region’s two largest economies and effects of QE nervousness,” ADB chief economist Changyong Rhee said in a statement released Wednesday.

“While economic activity will edge back up in 2014, current conditions highlight the need for the region to exercise vigilance to safeguard financial stability in the short term while accelerating structural reforms to sustain economic growth in the longer term.”

The ADB said it had revised down its 2013 GDP growth forecast for the region (excluding Japan) to 6 percent from 6.6 percent, with 2014 growth cut to 6.2 percent from 6.7 percent in April. China is expected to expand by 7.6 percent, with India lagging at just 4.7 percent in the year through to March 2014.

Growth in East Asia is now expected to reach 6.6 percent in 2013 and 2014, while Southeast Asia is forecast to slow to 4.9 percent, with only the Philippines still tipped to perform strongly.

However, should BMI’s forecasts prove correct, the rest of emerging Asia should soon start making up ground on the leaders.