A study by Morgan Stanley economists says Asia's economic growth could outpace that of developed countries by 5% by the end of 2023, thanks to China's relaxation of COVID-19 restrictions, strong domestic demand, and interest rates remaining in less restrictive territory.
The recent banking stress in the United States and Europe strengthens the case for Asia's outperformance, according to MS Asia economists led by Chetan Ahya in a Tuesday note.
"Lending standards will tighten in the United States and Europe, weighing on domestic demand," Ahya wrote.
"While this will spill over to Asia in the form of a constrained external demand recovery, we believe Asia will still be able to generate sufficient domestic demand... to allow growth differentials to shift in Asia's favour."
A 5% increase over developed markets would be the strongest since 2017, according to MS.
The Federal Reserve of the United States and the European Central Bank raised interest rates by 475 basis points and 350 basis points, respectively, in an effort to contain inflation - their most aggressive pace in recent times - but the rate-hike cycle in Asia was more subdued, they note.
Furthermore, China's reopening benefits the rest of the region, while Asia's other three major economies - Japan, India, and Indonesia - all have economy-specific factors driving domestic demand, according to MS.