Can Asia make a strong rebound amid sluggish export numbers?

There's a lot of pressure right now.

It has been noted that export growth in Asia has averaged just 3.8% over the past three years compared with the historical trend of 12.8% over the 1992-2007 period, and the question now is whether or not the region can make a strong recovery.

According to a research note from Morgan Stanley Research, there are three reasons for the weakness in Asia's exports: weaker global GDP and trade growth, subdued commodity prices, and loss of export competitiveness.

Further, it said it will be difficult to lift export growth meaningfully from here. While a cyclical recovery in global GDP in 2015 will probably lend some support to a cyclical recovery in exports, Morgan Stanley expects export growth in the region to remain structurally weak.

This is because of structurally weaker domestic demand growth in developed markets (DM) and the AXJ region’s loss of export competitiveness.

Here's more from Morgan Stanley Research:

Bottom line: The AXJ region’s macro environment is currently dealing with the challenges posed by excess capacity, high levels of debt and deflationary pressures.

This has meant that policy makers have found it difficult to boost domestic demand to support aggregate demand in the region. In this context, a recovery in external demand would be welcome, as it would help policy makers manage the issue of weak aggregate demand.

However, the incoming data suggests that export growth has remained sluggish. Indeed, combined exports for Korea and Taiwan declined by 1.8% YoY in the first two months of this year, weakening further from the 0.7% growth posted in the fourth quarter of last year, suggesting that the support from external demand remains weak.

This has only increased the urgency for policy makers to act to ward off deflationary pressures and boost domestic demand.