Looking at Four Asian Tigers in the Year of the Tiger

The Year of the Tiger has arrived. A symbol of power, boldness and speed, will the Year of the Tiger bring strong economic recovery to Asia?

The region is home to several high-growth economies, including Singapore, Hong Kong, South Korea and Taiwan. Also known as the Four Asian Tigers, these economies look ready to leap in the new year. But first, they have to overcome the uncertainty brought by COVID-19 variants and inflationary pressure.

1. Singapore

The Omicron variant of COVID-19 has cast a shadow over economic recovery in the United States and Europe. This has also put the world economy at risk. So far, Omicron has not struck full-force in Singapore yet, but some experts predict that Omicron infections will hit at least 15,000 cases per day in one or two months.

The worry that the new variant will hamper Singapore’s economic recovery is not unfounded. However, looking at the overall picture, it is less likely to derail Singapore’s economic growth as long as there are no labour crunch or large-scale business disruptions.

Unlike other countries, Singapore has one of the world’s highest vaccination rates. Many employers implement regular testing for staff in order to reduce the risks of workplace transmission. Vaccination and the relevant workplace protocols will help to prevent potential business disruptions. Hence, the probability of work stoppages is considered small.

However, Singapore is still facing challenges in its path of reopening. According to the Ministry of Trade and Industry (MTI), Singapore’s economy will continue to recover, albeit at a slower pace. The growth rate is expected to slow down to a range of 3 to 5 per cent in 2022, down from about 7 per cent in 2021.

Most sectors are expected to recover and contribute to the economic growth in 2022. Construction, especially, is seen as one of the main drivers of this tiger economy. Manufacturing will make this a prosperous Tiger year too. The sector performed well in 2021 and it is likely to lift Singapore’s economy, but probably at a lower rate. Some growth drivers, such as electronics and precision engineering, are already operating at near-full capacity, according to a Maybank report. This may slow down the growth of the sector.

In general, Singapore will continue its growth trend. But retail trade, food and beverage services and other tourism-related industries still have significant room for catch-up in the Year of the Tiger.

2. Hong Kong

Hong Kong’s economic outlook in 2022 is relatively more unpredictable compared to Singapore as it faces more uncertainties, such as China’s policy to Omicron, inflationary pressure, supply-chain bottlenecks, as well as geopolitical factors.

Some economists have already cut the economic growth forecasts for Hong Kong considering the impact of new COVID-19 cases on its border control policy. For example, recent new infections in nearby Shenzhen blew Hong Kong’s hope of reopening with the mainland, putting a damper on its reopening plan. The tightened travel restrictions may hinder international supply chains, increase costs and exacerbate the inflation problem.

The Year of Ox is a “recovery” year for Hong Kong as a result of “the further revival of global economic activity and stable local epidemic situation”, said Hong Kong’s third quarter report in 2021. Export is expected to be strong in 2022, which is a booster to the economy.

But Omicron is very likely to pose risks to this export-reliant economy. The new and hard-to-control variant will decelerate global economic growth. It has already tempered expectations of a fast recovery in the Year of the Tiger. Hong Kong will probably need to cope with more business activity disruptions, which may slow down economic growth.

In addition, the impact of geopolitical tensions on Hong Kong’s economy should not be ignored. It adds on more uncertainties to the course of economic recovery in 2022.

In summary, Hong Kong’s economic growth in 2022 will rely more on global export demand and Beijing’s COVID-19 control policies.

3. South Korea

South Korea expects its economy to continue to recover in 2022, propelled by a strong export demand, domestic demand rebounds as well as fiscal stimulus, according to Reuters.

Export in November in 2021 hits the highest monthly record, soaring 32.1 per cent from a year earlier. This is mainly because global economic recovery drives up the demand for chips and petrochemicals. The strong export demand will continue as its trading partners gradually return to production normalisation. South Korea’s finance ministry forecasts its GDP growth rate to be 3.1 per cent.

However, South Korea still faces downside risks. On one hand, the threat of Omicron increases the uncertainty of its economic growth. On the other hand, the country is still facing supply chain issues. These may disrupt the production process, endangering South Korea’s manufacturers. The supply crisis pushes up product prices, inducing the prolonged cost-push inflation and reducing the competitiveness of the country’s products.

For example, Hyundai Motor Co., one of the hardest-hit car makers, cannot predict how many key parts, including semiconductors, they can secure given the shortage of automotive chips, according to a report by The Korea Economic Daily. To resolve the supply chain problem is essential to further boost the country’s economy.

Generally speaking, South Korea will have better-than-expected performance if it can resolve the supply chain crisis and further stimulate domestic consumption.

4. Taiwan

Taiwan’s economic growth is projected to be 3.85 per cent in 2022, according to Academia Sinica, Taiwan’s top research institution.

One of the biggest contributors to Taiwan’s economic growth is its semiconductor industry due to the global surging demand for chips. The output is expected to expand in 2022 to NT$4.5 trillion (S$219 billion), according to a report by the Industry, Science and Technology International Strategy Centre.

To overcome the capacity constraint, Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, is investing in a new factory. In light of the production expansion and high demand, the advanced semiconductor manufacturing sector will continue to be a main driver to economic growth in 2022.

However, Taiwan still needs to tackle the same problems that the other tiger economies face in 2022, such as new COVID-19 variants, supply chain bottlenecks and high inflation risks. In addition, both US-China relations and Beijing’s Taiwan policy will be likely to affect the performance of the economy in 2022.

To have a healthy and robust economic growth, Taiwan must boost domestic spending. The local government has issued vouchers to residents to stimulate spending. However, it is not a sustained measure and the effect will be limited.

Controlling the spread of the virus, reopening the border and revitalising the tourism industry will be more effective in helping Taiwan’s economy return to prosperity.

In 2022, Taiwan’s recovery is continuing, but there are many deft steps it needs to take among the undergrowth of risks.

Overall, the Four Asian Tigers have a positive economic outlook in the Year of the Tiger. But at the same time, each country should well prepare for the upcoming challenges. The World Bank just adjusted the forecast for global economic growth to slow down to 4.1 per cent in 2022. This may have an influence on every tiger economy’s export and import demands, as well as supply chain efficiency. The tigers will still leap, just that there are more economic bumps ahead.

The article is an abridged version of the one first published in The Straits Times.