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Asian economies are set to grow by around 5% in 2024 thanks to digitalisation and green finance, with trade growth in the region outpacing that of North America, a report from think tank Asia House finds.

Vietnam and the Philippines will be “standout performers” overall, while India and Indonesia are due to see robust growth, putting the region as a whole on course to be a “global growth engine”.

Regional trade will be a key driver, Asia House says in its annual outlook, with Vietnam and Thailand topping the region in trade growth, and Asian economies due to benefit from friendshoring by China as it looks to diversify away from its global rivals.

The outlook suggests Asia will buck the predicted trend of sluggish global trade growth and an economic slowdown worldwide.

Speaking at an event in London to launch the report this week, Rio Tinto’s chair Dominic Barton said that the economic gravity of the world was “no longer shifting, it has shifted” towards Asia, noting that it wasn’t just growth that was significant, but the scale of innovation seen in Asian countries.

The increased use of digital contracts in the region is set to reduce the costs of trade finance and boost trade, as the availability of working capital grows due to “improved risk management, the extension of repayment terms, and trade credit insurance”, Asia House says.

If commodity prices remain high, Asia’s commodity exporters are also likely to profit from export revenue invoiced in US dollars, though the report adds that if demand for Asian goods is weak, this benefit might be limited.

But Asia’s trade finance gap remains a problem, the report says, and SMEs continue to be challenged by rising debt levels.

One potential solution is the rising prominence in the region of central bank digital currencies (CBDCs), which will “catalyse financial inclusion for SMEs”.

Efforts to create digital currencies are under way in a number of Asian countries, in addition to the collaborative mBridge project – a project between banks in China, Hong Kong, Thailand and the UAE aimed at reducing cross-border transfer times using multi-currency CBDCs.

Discussing digital transformation, Pamela Mar, managing director of the International Chamber of Commerce’s Digital Standards Initiative, told event delegates, including GTR, that Asia had succeeded in putting “digital front and centre”.

The report notes that the availability and use of green finance, “which slowed in 2023 amid restrictive financial conditions, is poised to expand”. This, it says, is due to “the outperformance of green bonds and the importance of state-owned enterprises in the region”.

Asian countries will aim to “entrench growth in green finance” in the coming years to drive investment in renewable energy and sustainable manufacturing, it adds.

And while the economic slowdown in China is “a concern”, the report says, forecasts put the country’s growth at between 4.5% and 5%.

Zheng Zeguang, China’s ambassador to the UK, emphasised China’s strengths to Asia House delegates, noting that “in the first 11 months of last year, the number of newly established foreign-invested enterprises in China actually grew by over 36% year on year”.

Looking ahead, Zheng remained bullish, saying: “Betting against China has never succeeded in the past and will not succeed in the future.”

Discussing the results of Taiwan’s election, Zheng said that it had “in no way changed the basic fact that Taiwan is part of China and there is only one China in the world”.

The report points out that Asia still faces significant uncertainty and geopolitical risks, including elections in India and Indonesia, volatility in US interest rates and disruption to maritime trade.

And despite trade growth looking set to exceed North America’s, it still lags behind that of the Euro area.