Asia Pacific consumers will likely have more to spend on discretionary items in 2024, said Mastercard Economics Institute (MEI) recently.
According to MEI’s latest economic outlook, the macro picture is expected to be one of modest growth, largely on par with 2023 levels, as economies continue to stabilise and key drivers of growth, like exports and tourism, edge closer to pre-pandemic norms.
Drilling down into individual economies, growth expectations are mixed across the region, MEI noted.
On one end of the spectrum, Singapore, Malaysia, the Philippines, Thailand, Taiwan, and South Korea should see upticks while slowdowns are anticipated in Australia, the Chinese Mainland, Japan and New Zealand, MEI said, adding that India and Indonesia are expected to hold largely steady at 2023 levels.
Anticipated spend shifts
As the economic ripple effects of the pandemic subside in 2024, Asia Pacific consumers should be able to allocate a larger share of their wallets to discretionary spend such as travel and entertainment, MEI observed.
This is in comparison to 2022-2023, years marked by high inflation, that caused essentials (or ‘needs’) like groceries and fuel to take up a larger percentage of household budgets, leaving less money left over for ‘wants’ or extras, the organisation said.
In 2024, real consumer spending in Hong Kong is expected to increase by 2% year over year, MEI added.
“2024 is set to be a year of recalibration as consumers rebalance their wallets. And what the data shows is that people remain eager to travel and dine out, although levels vary from market to market,” said David Mann, Chief Economist, Asia Pacific, Mastercard. “Amidst this disorienting global backdrop, the Mastercard Economics Institute helps clients to translate macroeconomic forces down to the country, category, and even company levels, in addition to counselling on possible scenarios and the implications they would have on demand.”
Signifying another shift in demand, in 2024, consumers across Asia Pacific are expected to spend more on goods than they did in 2023, MEI said.
This marks the start of a new cycle that will see growth rates for goods rebounding to pre-pandemic levels, reversing the 2022-2023 trend that saw consumers prioritizing key ‘out-and-about’ services such as dining and ‘revenge’ travel as economies re-opened post-pandemic, MEI added.
In 2024, the rising demand for goods, such as household items and clothing, is also expected to resuscitate the Asia Pacific manufacturing sector, which plays a crucial role in the global economy, MEI predicted.
This shift will drive a convergence in performance between the manufacturing and services sectors in the region which trended in opposite directions as manufacturing lagged and services boomed in 2023, MEI added.
The Chinese consumers story
The headline for 2024 will be a further recovery of Chinese outbound travel, MEI estimated.
The addition of more countries to China’s approved list for group travel, which typically have less stringent visa restrictions compared to individual travel, will continue to support overseas tourism spending, MEI said.
The recovery of specific corridors will hinge on the authorities’ prioritisation of flight capacity allocation, MEI estimated.
While Southeast Asia destinations such as Singapore, Malaysia, Vietnam and Thailand were early outperformers in 2023, it is expected that destinations in Northeast Asia, North America and Europe should catch up in 2024, according to MEI.
