Asia’s middle class shows huge opportunities: ADB

Developing Asia's middle class is increasing its size and purchasing power with remarkable growth in expenditure.

KARACHI: Developing Asia’s rapidly expanding middle class is likely to assume the traditional role of the US and Europe as primary global consumers, and help rebalance the global economy, says a report on Asia’s middle class prepared by the Asian Development Bank (ADB).

The report, published in a special chapter of ‘Key Indicators for Asia and the Pacific 2010’, the flagship annual statistical publication of the ADB, found that Asia’s consumers spent an estimated $4.3 trillion (in 2005 purchasing power parity dollars), or about one-third of the Organisation for Economic Co-operation and Development (OECD) consumption expenditure in 2008 and by 2030 will likely spend $32 trillion, comprising about 43 per cent of the worldwide consumption.

“Developing Asia’s middle class is rapidly increasing its size and purchasing power, and will be an increasingly important force in global economic rebalancing,” said ADB Chief Economist Jong-Wha Lee.

“Even though the Asian middle class has significantly lower income and spending relative to the Western middle class, its growth in expenditures has been remarkable and its absolute levels are commanding,” he added.

The report projects that by 2030 much of developing Asia will attain middle class and upper class majorities, with China and India expected to provide the largest number of new middle class.

With the appropriate middle-class friendly policies, the report says, Asia will be able to move away from export-led to domestic-led consumption growth and reduce its exposure to negative external shocks, such as the 2008 global financial crisis. In turn, it will also help correct the global imbalances that contributed to the financial crisis.

More resilient during global crisis

Asia has also shown to be more resilient than initially expected to the global financial crisis, with major economies posting solid growth, even as demand for exports from the US and Europe slumped, the report said.

In 2009, when the worst effects of the crisis were flowing through the global economy, China’s GDP grew 9.1 per cent and India’s 7.4 per cent. Other strong performers include Bangladesh with growth of 5.7 per cent, Vietnam with 5.3 per cent and Indonesia with 4.5 per cent.

The statistics also show that the Asia and Pacific region has the largest share of global GDP measured in purchasing power parity (PPP) terms at around 33 per cent, with Europe accounting for 28 per cent and North America 24 per cent, while six of the world’s top 20 economies, in GDP at PPP terms, come from Asia.

Published in The Express Tribune, August 20^th,2010.