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Asian era coming

South Korea will overtake Japan’s gross domestic product per capita in 2027, followed by Taiwan in 2028.

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A vastly different economic landscape will emerge from a post-pandemic world with countries that embrace the power of digitalization emerging on top such as Taiwan, China and South Korea
According to a report of the Japan Center for Economic Research (JCER), China will emerge as the world’s largest economy in 2033.

Another revelation was that Asian economies South Korea and Taiwan are set to become global powerhouses as these countries were quick in adapting to the virtual world which had the pandemic as a catalyst.

South Korea will overtake Japan’s gross domestic product (GDP) per capita in 2027, followed by Taiwan in 2028.

Japan’s GDP per capita was overtaken by Singapore in 2007 and by Hong Kong in 2014. A core indicator of economic performance, GDP per capita can also be perceived as a measure of a country’s labor productivity, and its slowdown portrays the stagnation of the Japanese economy, according to JCER.

JCER noted that considering that Japan’s GDP per capita was 6.2 times higher than that of South Korea and 4.4 times higher than Taiwan’s in 1986, at the start of its bubble economy, “Japan’s rapid decline in labor productivity is striking”.

China’s GDP will surpass that of the United States for the first time in 2033, making it the world’s largest economy, JCER estimated.

Using a baseline scenario, the study predicted in 2033, China’s GDP will become 2.4 times larger than in 2020, at $35.841 trillion, surpassing the US ($35.821 trillion in 2033) and becoming the world’s largest economy for the first time.

“The US-China reversal is expected to be delayed by four years from last year’s baseline forecast and by five years from the risk scenario, due to slower growth in China and the effects of aggressive fiscal policy in the United States,” it noted.

However, while China’s declining population will put downward pressure on growth, the United States, which is expected to maintain stable population growth and high productivity, will regain its position as the world’s largest economy by 2056.

Unlike the periodic Asian Development Bank (ADB) estimates, which focus on the current growth rate of developing countries in Asia, JCER’s Asian Outlook is a long-term, comprehensive forecast of economies in Asia.

Included as inputs in the JCER report is the digital potential of each country and the findings are used as a basis for estimating Total Factor Productivity (TFP). The higher the digital potential, the more likely a country will be able to promote digital transformation, which is key to economic growth and boosting labor productivity. In addition to the baseline scenario, the JCER report included various analyses of risk scenarios.

The growth of the Philippines will be constant to a little below six percent annually, to become the second fastest-growing in the Association of Southeast Asian Nations Economic Community behind Vietnam.

The unkown factor would be the cross-strait tensions. “If it escalates in 2025, Asian economies will take a huge hit,” according to JCER.

In the JCER risk scenarios, the economic impact of a “Cold War” erupting between the US and China, even if it does not necessarily lead to an emergency will be substantial.

If a “Cold War” between the US and China were to occur, China, Taiwan, South Korea, Japan, and other Asian countries would be hit hard, with negative growth, the think-tank warned.

What is clear, based on the study, is that Asia will assume the role of being the global economic engine after the crisis has passed.

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