The latest reports on developing Asia’s economies seem more and more unsettling. The Asian Development Bank recently cut its projections for 2013 growth for Asia’s developing nations, as well as its growth projection for 2014. Other monitoring groups including the IMF, HSBC, and others have warned of weakness in Thailand, Malaysia, Vietnam, India, and of course China.
But this broader worry does not differentiate enough between developing Asian economies and the policies they are taking to address the problems caused by China’s slowing economy, the regional giant, and by years of state spending throughout developing Asia on massive infrastructure projects and other stimulus measures. In Thailand, the government is essentially in denial, continuing to go forward with more huge infrastructure projects that, while necessary to upgrade rail and road links, are going to saddle the country with even more debt under the current plans and do little to transition Thailand’s economy away from dependence on state largesse. The Yingluck government also apparently has no idea what to do with the vast excess of rice it has stockpiled, after embarking on an ill-fated scheme to guarantee Thai rice farmers—a critical Puea Thai constituency—a price floor for their crops. (Cambodia and Laos face similar problems, albeit on a smaller overall scale – but Laos is planning to amass so much debt for energy and road projects that it is hard to imagine how these massive projects won’t sink the Lao economy.) Still, Thailand’s attractiveness to foreign investors, its tourism industry, which seems to survive any problems, and the fact that Japanese manufacturing firms have invested so much capital in the country that they are unlikely to move many operations out no matter the economic or political climate, guarantees Thailand a decent recovery if it grows slower this second half of the year.
In Vietnam, as I wrote earlier today, the economy is staggering under the weight of massive, still to be revealed debts at state enterprises, and the pace of reforms instituted by the government in Hanoi is too slow to boost investor confidence, dismantle the state enterprises effectively, and get Vietnamese consumers shopping again. Of all the countries in developing Asia, Vietnam faces the highest hurdles to getting back to the 7-8 percent growth it had been posting for years.
But other countries in the region should not be tarred with the same brush. Singapore has shifted away from the traditional pillars of its economic success masterfully, and a recent report showed that it was closing on Switzerland as a center for private banking. And, as I wrote in a recent column in BloombergBusinessWeek, for all its problems, China is at least addressing its slowdown rationally and with a clear plan of how to cool the economy.