Asia to outperform Europe, US this year, says DBS

MANILA, Philippines - The Development Bank of Singapore said that 2010 is the year that Asia will outperform both Europe and the United States.

“This is Asia’s year,” Dave Carbon, DBS managing director for economic and currency research, said.

In an interview with FinanceAsia, Carbon said that the key quantifiable factor is the shift in who generates the new demand every year — local, indigenous, domestic demand that is the source, even the very measure of economic growth.

“And in 2010, that baton will pass from the US to Asia. The region will create more demand than the US, and will become the world’s biggest driver of economic growth,” Carbon said. “He also said that the succession process has run for at least two decades, but the handover will finally take place, and Asia’s leadership will likely last for the next 50 years, if not longer.”

Demand growth in Asia excluding Japan has been rapid during the past 20 years, typically averaging around seven percent for the 10 leading economies in the region — China, Hong Kong, India, South Korea, Taiwan, and the Asean member states of Indonesia, Malaysia, Philippines, Singapore and Thailand.

Carbon said to FinanceAsia that while the aggregate size of these economies has been too small, those 20 years of fast growth eventually add up, and the region is now about 44 percent of the size of the US economy.

But Carbon warned that the region’s dramatic recovery cannot be maintained indefinitely.

A possible sideways grow will likely occur after 2010.

He told the Asian publication that demand will level off after the dramatic rebound from the “shell-shock” experienced after the collapse of Lehman Brothers in September 2008.

Supply will be hit as the excess capacity that has fuelled a double-digit increase in output starts to erode, and that the central banks within the region are likely to tighten monetary policy to cap incipient inflation.