Macroscope | Why Asia’s old plan to dodge ‘middle-income trap’ won’t work any more

Developing nations are being urged to boost domestic demand and mutual trade to drive growth, but key factors like population ageing must also be addressed

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Customers flock to buy vegetarian food during the Vegetarian Festival at a market in Chinatown in Bangkok on October 21. The International Monetary Fund has projected Thailand’s economic growth forecast for 2025 at 2 per cent and expects the gross domestic product to sharply slow to 1.6 per cent for 2026. Photo: EPA

Published: 8:30pm, 8 Nov 2025Updated: 9:15pm, 8 Nov 2025

Is the famed Asian economic miracle that endured for decades from the 1950s onwards giving way to a “doom loop” of ageing populations, consequent fiscal strains, falling output, declining consumption and sagging economic growth? Will the advent of artificial intelligence (AI) compensate for these trends or simply add to unemployment in the region?

Some development experts are beginning to acknowledge that while some of these issues have been examined in depth individually, their collective impact upon what has long been viewed as the world’s fastest-growing region needs closer study.

This view is receiving much-needed attention now, for example by the Asian Development Bank Institute in Tokyo. The institute’s recently appointed dean and former finance minister of Indonesia, Bambang Brodjonegoro, told me in a recent conversation that the findings of a new flagship study on why the Asian economic miracle appears to have gone bust and how it might be renewed would be published in 2027.

The original miracle was achieved on the back of spectacular export growth from Asia to the United States. The phenomenon began in Japan, whose economy lay in ruins after World War II, and then South Korea and later the other “tiger” economies of Taiwan, Hong Kong and Singapore. Export-led growth became a development mantra.

All that has changed with the advent of tariffs and other sanctions since US President Donald Trump began his second term in office. Export-led growth is no longer seen as a primary engine of growth.

Instead, developing nations in Asia and elsewhere are being urged to boost domestic demand and rely more upon mutual trade rather than continue leaning upon the US. Trump insists that in many cases these countries have enjoyed “unfair” trade advantages and export surpluses.

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