Among the most bullish is Rajiv Biswas, Asia Chief Economist at IHS Global Insight, a New York-listed economic and financial information services provider. He has raised his growth forecast for the U.S. to 3.2% after corporate tax cuts were extended and expects China to expand 9.5%.

 

“Even when we look into 2012, we also expect growth to remain quite strong in emerging Asia.” Biswas told CFO Innovation’s Cesar Bacani. Below is Part 1 of the interview, in which Biswas explains why he is particularly optimistic on China and the U.S. Part 2 of the interview, on regional and global risks, will be published separately. 

Absolutely. I think the key turning point was in December, when President Obama signed into law the tax cut package in the U.S. This was actually a very important factor changing the outlook for U.S. economic growth in 2011. We at IHS Global Insight forecast that this will result in U.S. GDP growth increasing to 3.2% in 2011. Prior to the tax cut package, the consensus was considerably lower.

 

Definitely over 3% growth for the U.S. represents a very good underpinning for the global outlook. The second important positive point is that we also expect that China will continue to grow strongly in 2011. We’re forecasting growth of 9.5% in 2011 for China. Given these are the two biggest economies in the world, the combination of these two stories means that it’s quite an important boost for the outlook for the Asia Pacific, particularly because most of the largest East Asian countries are such large export sectors.

 

Overall, we expect this environment will be very supportive for the emerging economies both in Northeast Asia and in ASEAN. China is South Korea’s biggest trading partner, for example, so the very strong growth continuing in China plus the stronger growth in the U.S. is very supportive for South Korean exports this year. Growth rate in Taiwan will be pushed up as well, and of course in Hong Kong.

 

We expect strong growth to also continue in 2011 in India. We’re forecasting growth of 8.3%. What this means overall for emerging Asia is that we will see a second strong year of growth, at about 7.1%, compared with 8.2% in 2010. Given there was such a strong rebound in emerging Asia last year, over 7% [in 2011] is a very favourable story for the Asian economies.

 

Even when we look into 2012, we also expect growth to remain quite strong in emerging Asia, at about 7.2% because the drivers are still going to be in place. We expect the U.S. economy to actually continue its momentum into 2012. Importantly, we also expect China to still be growing quite strongly in 2012 and also India. So overall all the drivers for the region are still in place in 2012.

 

The risk of a double-dip recession has abated considerably in 2011. Many corporates in Asia were extremely worried about that scenario in the middle of last year. This has abated a lot and what that means is that corporate spending plans will change. A lot of CEOs of multinationals and CFOs were very conservative in their positioning. They were conserving their cash even though they had such strong cash flows last year.

 

Now they economic growth in Asia continuing and the U.S. outlook is looking better. It means there will be more corporate spending. This is definitely what we expect in the U.S., that corporates will be starting to spend more into 2011, and also in Asia Pacific. This is very much the sort of story that make multinationals feel more confident to start moving ahead with their investment plans.

 

Yes. Australia right now is going through some difficulties because of the flooding [in Queensland]. But generally they’ve also been a participant in the Asia recovery last year because of the resource sector. They came through very well through the global financial crisis because of their strong links with China. We do expect growth to continue also in Australia albeit in a not such high rates as emerging Asia, since they are a developed country.