Growth in the APAC region has and will continue to be driven by robust domestic demand, including a pickup in private investment, offsetting the negative impact of rising interest rates. Regional trade and industrial production are expected to improve gradually, alongside green shoots in the global economy and the ongoing recovery in commodity prices. On aggregate, ongoing output and jobs growth should support steady leasing activity in the commercial sectors, even as fundamentals remain divergent across individual markets.
APAC growth is set to expand by 4.4% this year and 4.5% next year, very much in line with recent averages. Clearly, developed Asia, which includes the likes of Japan, South Korea, Hong Kong, and Singapore, is unlikely to see the same levels of marginal gains in growth that developing Asian economies are experiencing. In addition, China is still on the path of recalibrating its sources of economic growth, tilting away from investments, low-end manufacturing and a cheap labor market advantage towards a model that is focused on innovation, services and a larger consumption component. However, monetary conditions in developed Asia remain accommodative, supported by still relatively benign inflationary conditions, and tight labor markets. That in turn, and importantly, feeds into the vitality of the region's smaller economies. Most of APAC is also well placed to sustain expansionary fiscal policies over the next couple of years, as governments ramp up on infrastructure spending and social programs that will foster longer term inclusive growth.
Source : UBS AG