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Monday, Aug 04, 2025

Asia’s growth to outpace both US and Europe this year, Morgan Stanley says

Asia’s growth to outpace both US and Europe this year, Morgan Stanley says

Driven by strong domestic demand, Asia’s economic growth will outpace both the US and Europe this year, according to Morgan Stanley.
“The big argument that we’ve been making ... for Asia, including Japan, to outperform versus US and Europe – is the fact that there is domestic demand strength,” Chetan Ahya, chief Asia economist at the investment bank , told CNBC’s “Street Signs Asia” on Monday.

“China is one. It’s going through a rebound quite nicely because of reopening, but also for fiscal and monetary policy being supportive.”

The economist added that three other large Asian economies – India, Indonesia and Japan – are also showing robust domestic demand.

“We are expecting the region’s growth to outperform by about 500 basis points by the end of this year, which is essentially in the fourth quarter of this year,” said Ahya.

The economist’s forecast for the region corresponds with the latest International Monetary Fund view that Asia Pacific remains a dynamic region despite a challenging year for the world economy.

“We project the region will contribute more than 70 percent of global growth this year as its expansion accelerates to 4.6 percent from 3.8 percent last year,” the IMF wrote in a blog.

China’s recovery is “going better than everybody’s expectations,” said Ahya, and he doesn’t see inflation as a major risk for the country.

“Inflation is a lagging data point and I don’t think we should look at the inflation number and conclude that the recovery is not going on track,” he noted, adding China’s property sector is “rebounding so sharply” which will add to the growth momentum.

More people in China want to buy houses again, according to a first-quarter survey recently released by the People’s Bank of China. The increase follows the end of China’s pandemic controls.

The World Bank also expects East Asian and Pacific economies to grow more than it previously estimated due to a sharp rebound in activities in China.
India also shows strong growth potential due to cyclical factors, said Ahya.

“The banking system has been cleaned up, [the] corporate sector has delivered,” noted the economist.

As a result, there has been a “nice acceleration in credit growth” because there is risk appetite seen in both borrowers and lenders, he added.
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