As many countries continue to suffer amid the financial crisis, the burgeoning economies of South-East Asia are more than weathering the downturn, with some astonishing growth rates recorded.
Tiger cub economies of South-East Asia challenge the West
Despite continuing worldwide pain following the biggest financial crisis since the Wall Street crash in 1929, countries including Indonesia, Malaysia and the Philippines are showing astonishing growth.
Malaysia's economy, for instance, grew by 5.4 per cent in the past quarter. The country begins this year as the third-largest economy in South-East Asia, lagging behind only Singapore and Indonesia. It is also the 29th-largest economy in the world.
By contrast, the World Bank has cut its projection for the US for this year by 0.5 per cent, forecasting GDP growth of 1.9 per cent, down from a disappointing 2.2 per cent for last year. In Europe, the recession is biting even longer and harder. The UK is faring even worse and is expected to have shrunk by 0.1 per cent to the end of last year. The Spanish economy contracted by 0.3 per cent between June and September and Portugal by 0.8 per cent. Even in Germany, Europe's powerhouse, the economy grew by only 0.2 per cent in the third quarter of last year.
But the burgeoning economies of South-East Asia are more than weathering the recession and their growth rates are far outstripping those of more established western economies. Those of the Middle East are also holding up well in countries not directly affected by the Arab Spring.
The contrast between the West's flagging economies and the tiger economies of the developing world is highlighted by Indonesia's recent economic boom. According to a new report by the financial services giant Morgan Stanley on the Indonesian property market, for example, the country's growing middle class is fuelling a spectacular property boom. Township development stocks rose by 21 per cent in the second half of last year.
Morgan Stanley also reports that property prices are rising by 5 per cent quarter-on-quarter and that take-up rates are strong. Seeing no signs of market weakness, Morgan Stanley has raised its marketing sales forecast for this year to 21 per cent from less than 10 per cent. This represents a spectacular net income growth of about 20 per cent for this year and next.
The leading Indonesian property developer Ciputra Developments reports that prices have doubled in some prime locations such as Tangerang. The developer is targeting 40 to 50 per cent growth, driven by about half a dozen new projects.
Another indication of the strength of the country's property market is the growth in the elevator sector, a sure indication of prime property development and increasing modernisation. Frost & Sullivan says a vibrant economy is driving the Indonesian elevator market. One of the key drivers in the market is increasing urbanisation, which has resulted in increased construction activity in cities such as Jakarta and Surabaya.
The Philippines economy grew 7.1 per cent in the third quarter of last year, exceeding even the most bullish predictions. This growth resulted in GDP expanding by 6.5 per cent in the first nine months, well above the target range of 5 to 6 per cent. The Philippines registered the fastest economic growth in the Association of South-East Asian Nations, followed by Indonesia with 6.2 per cent, Malaysia with 5.2 per cent, Vietnam with 4.7 per cent, Thailand with 3 per cent and Singapore with only 0.3 per cent.
According to the Philippine National Statistical Coordination Board, a sharp increase in consumer and government spending, combined with increased investments in construction and a third consecutive rise in quarterly external trade contributed to the high growth.
The rapidly growing middle class is a prime driver of economic growth in countries such as Indonesia, Malaysia and the Philippines. Economists are increasingly quoting Engel's Law when describing the unexpected economic boom now taking place in these countries.
Developed in 1857 by the German economist Ernst Engel (not to be confused with Karl Marx's associate Friedrich Engels), the theory argues that, as average per capita increases, the proportion of income spent on food inevitably decreases. Engel lived at a time when the populations of Europe and the US were experiencing a transition from a food-based economy to an industrialised one with a rapidly growing consumer class. Emerging economies in regions such as Asia and the Middle East are now undergoing a similar transformation. In countries such as Indonesia, per capita incomes are rising from levels of about US$3,000 (Dh11,019) to $5,000 a year, fuelling spending on consumer goods and services.
With governments starting to turn their attention away from capital-intensive industrialisation towards countryside and agricultural development, economists expect the middle class also to expand in areas in the Philippines such as Davao, Central Luzon, Southern Luzon, and Central Visayas.
At a time when the world's developed economies are struggling to cope with what is now being termed a "triple-dip recession", the new tiger economies are catching up fast.