Asian growth: Is big still beautiful?

Back in 2009 I wrote a post for The Interpreter suggesting that, in the aftermath of the GFC, big was beautiful when it came to Asia\'s growth prospects, citing in particular optimism about China, India and Indonesia. For the next couple of years, that looked like a good call, but now two of those three are experiencing growth problems.

I discussed the ongoing debate over China\'s growth performance in two earlier posts, but China is not the only Asian giant with growth worries. India\'s recent growth record – accompanied by, and in no small part a product of, a truly depressing political situation – has turned hopeful Indians into worried ones.

India\'s first quarter 2012 GDP reading (also the final quarter of India\'s 2011-12 fiscal year), which saw growth dip to just 5.3% over the previous year, was the lowest result in almost a decade. Only a couple of years ago, some observers were daring to wonder whether India could reach double-digit growth for the first time. With 5% now looking the more likely alternative, some observers have started to pen their obituaries for \'Incredible India\' and wonder whether India could be the \'first BRIC Fallen Angel\'. [fold]

Granted, the second quarter 2012 reading (the first quarter of India’s 2012-13 fiscal year) did come in higher than expected, at 5.5% on the previous year. That has prompted some hopes that the worst could be over. But it hasn\'t stopped a range of economists slashing their growth forecasts. Then there are the concerns about the quality of the data...

What of Indonesia, the third member of my original trio? Here at least the story is rather different, with more talk of boom than gloom. Indeed, instead of worrying about faltering growth, analysts have been debating whether or not Indonesia\'s economy is overheating.

Overall, it still seems likely that in an international environment overshadowed by the continued risk of a worsening of the eurozone crisis, Asia\'s more open and trade exposed economies are going to be at greater risk of growth volatility than the bigger, more closed economies, and hence that size will continue to matter. But it\'s also fair to say that big isn\'t looking quite as beautiful as it used to.

Photo by Flickr user Mr TGT.