At The Bottom Of Asia's Slowdown
Analysts at Media Partners Asia (MPA), publisher of The Asia Media Journal, recently downgraded forecasts for 2012 and 2013, forecasting that regional advertising will grow at its lowest rate in the next 12 months since contraction back in a downturn-ridden 2009.
Numerically, not much has changed since then, but the good news is that the macro environment in key Asian markets has begun to stabilize, which should feed through to a robust ad performance next year.
As a result, MPA’s existing forecast for next year – a 4.7% increase in net advertising, measured after discounts – is perhaps somewhat conservative, especially as markets such as China, India, Korea and Malaysia could each grow higher than expected.
One reason for next year’s exacerbated slowdown is that many markets are coming off a high base (especially from 1H 2012) due to the Olympics.
Despite the Olympics however, the region did not grow as much as it perhaps should have this year, due to six consecutive quarters of slowing GDP expansion in Asia ex-Japan.
Brakes on in Japan
Japan remains a major drag. After a projected 2.3% growth in 2012, MPA predicts a 0.3% decline in Japan’s ad market next year, which is a big reason for below par performance in Asia overall.
Ex-Japan, advertising in Asia will grow by 7% in 2012-13 before a spike to 9.5% growth in 2014, driven by multiple global and local events as well as a surge in domestic demand across key economies.
“Encouragingly, we’ve reached the bottom of the macro slowdown in much of Asia,” says MPA director Vivek Couto.
“There are clear signs among leading indicators such as auto and retail sales that consumption is steadier, which will help buoy advertising next year,” Couto adds.
“The Philippines, Indonesia and India are expected to grow at a double-digit pace,” he continues.
“China and Thailand are expected to increase at a high single-digit rate, while there are sufficient demand drivers in place for Korea to put in a better showing in 2013.”
Advanced and Catch-Up Asia
Media buyer ZenithOptimedia’s latest numbers have ad spend in Asia growing by 6.1% in 2012, and by 5.5% in 2013.
Dividing Asia ex-Japan into two major blocks – Advanced Asia and Catch-Up Asia – Zenith expects fundamentals across both to remain resilient next year, and growth-oriented in 2014 and beyond.
Advanced Asia, comprising Australia, New Zealand, Hong Kong, Singapore and South Korea, is expected to grow by only 2.3% this year because of what Zenith characterizes as “a slowdown in trade with China, and partly because global uncertainty has encouraged advertisers to devote more of their resources to developing rather than developed markets.”
Advanced Asia however is expected to return to 4.0% growth in 2013, Zenith says, followed by 5.0% in 2014, due to increasing advertiser confidence in the global economy.
Catch-Up Asia, which consists of China, India, Indonesia, Malaysia, Pakistan, the Philippines, Taiwan, Thailand and Vietnam, is forecast to grow at 10.8% in 2012, and by 10-11% in 2013 and 2014.
On the macro front, the news flow coming out of China appears positive with the country’s new generation of leaders expected to pursue a pro-stability agenda based on incremental reforms in the coming year.
This is good news for China and its dependent neighbors in Asia, with GDP growth on the mainland expected at 8-8.2% next year.
Longer-term, China’s reforms are ambitious, including: reforming the financial sector to improve investment efficiency; liberalizing the service sector to generate new growth engines; modernizing agriculture; and driving urbanization.
Much will also depend on the US, though a steadier China will offset some of the drag from expected weak US momentum in the early part of next year.
Weak US momentum
One concern is that the climate will remain challenging for more external-driven economies in early 2013, including Singapore, Taiwan and Korea.
A number of economists expect Singapore in particular to experience a mild technical recession in the first half of next year.
Interest rate cuts and more stimulus packages will boost Korea but Taiwan, under the hammer this year, does not have these options.
However, the US economy is expected to transition to a firmer growth path and better times are expected for this grouping, including Taiwan, in the second half of 2013.
This is an edited extract from the Q4 2012 edition of The Asia Media Journal. The entire issue can be downloaded as an iPad app here.