22/02/2013

The Emerging Asian Economic Outlook

Takeshi Takayama 

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  • Overall, the growth rate of emerging Asian economies has slowed down since last year. It seems to have reached a certain level, but we cannot discern a recovery yet. Economic diversity continues in individual countries. The economies of South Korea and Taiwan are sluggish because their export oriented economies have been impacted by the global slump. India, which suffered from high inflation, has also seen a reduction in the growth rate. On the other hand, ASEAN countries have achieved higher growth because of strong domestic demand.
  • Financial markets haven’t gone through rapid ups and downs, except the Indian market. Nonetheless, strengthening currency is a new concern in South Korea and the Philippines. This is an incentive for their central bank to cut their policy rates. The Indian rupee has been volatile in part due to foreign investor sentiment.
  • The Inflation rates in emerging Asian economies are stable except in India. Some central banks have room to cut their policy rate and a few have done so. On the other hand, supply restrictions keep India’s inflation rate high.
  • South Korea, Taiwan and India, whose economies are sluggish, are expected to recover in the future. However, the pace is very slow and their growth rate is still below their potential growth rate in 2013. Their central banks see this as a chance to adopt a rate-cutting policy.
  • Potential crises in foreign economies are a downside risk factor of emerging Asian economies, especially the EU debt problem and the prolonged fiscal cliff in the U.S. However, the possibility of this problem being actualized seems low.
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