Driven by India and China, the emerging Asian economies no longer witness slump, which will lead the global recovery, British financial services major Barclays said on Monday.
"The slump in activity in emerging Asia is over. We believe the region returned to positive growth of the aggregate level in the first quarter of 2009 -- driven by China and India -- and the recovery is broadening to the more open industrial economies in 2009," Barclays Capital, an investment banking arm of Barclays, said.
Barclays capital included 10 Asian economies -- India, China, Taiwan, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand and Hong Kong.
In a research paper, Barclays Capital expected the recovery in Asia to arrive slightly earlier than the rest of the world, reflecting relatively stronger balance sheets and the significant fiscal and monetary stimulus.
After nearly two years of successive downward revisions to its growth estimates, the investment bank has revised upwards its estimate of regional economic activity in 2009 to 4.3 per cent from 3.5 per cent and 6.8 per cent from 6.5 per cent for 2010.
"We assess risks surrounding these forecasts as skewing towards positive surprises, particularly in China, India and Indonesia," the research paper said.
The contribution of India and China to overall growth in the economy could be gauged by the fact that if these two economies are excluded, the growth rate is expected to be negative 1.2 per cent in 2009 and positive 3.8 per cent next year, the research paper said.
Global economy is expected to register growth rates of negative 1.4 per cent in 2009 and 2.9 per cent next year.
Barclays expected GDP growth in the region to accelerate in the second half of this calendar year, with activity expanding around 8.3 per cent SAAR (seasonally adjusted average rate) in the third quarter of 2009 and 8.4 per cent SAAR in the fourth quarter before softening to slightly below trend into 2010.
In the countries where credit growth has been strong due to financial deepening such as India and China, strong capital bases have helped to limit the fallout from weaker growth.
"This means that while credit growth has slowed sharply in Asia, it is driven by a lack of demand rather than a disruption in supply. As a result, once economic conditions normalise we expect a mild expansion in credit," it said.
The paper also said global indicators have limited forecasting power for growth in India, China, Indonesia and the Philippines because domestic policy and other homegrown factors tend to mitigate the effects of external macro and financial market developments, it said.