Coming U.S. Economic Boom Seen Boosting Vietnam Most in Asia
A surging U.S. economy on the back of massive stimulus and pent-up demand will benefit exporters in Asia, with Vietnam receiving the biggest windfall, according to Bloomberg Economics.
If the U.S. growth rate accelerates to 7.7% in 2021 as forecast by Bloomberg Economics, up from the 3.5% seen late last year, that would add more than 1 percentage point to Vietnam’s expansion, research by Chief Asia Economist Chang Shu showed Tuesday. China will also see a significant gain of around 0.6 percentage points.
“U.S. growth upgrades are good news for Asian exporters,” Shu wrote, noting that the U.S. buys more than 10% of Asia’s exports on average. In addition to the increase in direct demand, “there are also likely to be significant indirect spillovers” with Asian firms entwined in a web of supply chains to the U.S.
The projection from Bloomberg Economics factors in an estimated $1.7 trillion of extra savings by American consumers and wealth effects from higher asset prices. As a result, it is significantly higher than the consensus forecast of 5.8% as of April 8, which compares with 3.8% in November.
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Still, Shu’s research showed that even that more modest upgrade would give a bump to growth in Asian economies ranging from 0.14 to 0.52 percentage points, with China’s growth expected to be lifted by around 0.3 percentage points.
A key factor determining the extent of spillovers will be the composition of U.S. spending.
“The greater the share that goes to services, the less punch the U.S. consumer splurge will pack for Asian exporters,” Shu wrote.
U.S. personal spending on goods rebounded sharply in the second half of last year at the expense of services consumption, but as reopening allows people to go out again, that could be a potential damper on the expected spillover to Asia’s exporters, according to Bloomberg Economics.
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