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B&E Indicators
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The road ahead for Asia

Issue Date - 30/05/2012
The economies of Asia are maintaining their impressive growth trajectories. Yet the global backdrop in 2012 is one of uncertainty: the eurozone is grappling with its sovereign debt crisis; and more generally, stagnation in the major industrial economies is stunting demand for Asia’s products. For these reasons, experts forecasts that growth in Asia will ease to 6.9% in 2012 (from 7.2% in 2011) before coming back to 7.3% in 2013.

More regional than global
From the collapse of Lehman Brothers in September 2008 through the initial stages of the global recovery in 2010, external factors generally dominated Asia’s growth outlook such that countries and subregions largely moved in sync. In contrast, 2011 has seen general factors give way to country-specific factors driving the outlook. For instance, for South Asia, growth in 2011 fell sharply to 6.4% from 7.8% in 2010. The fall was largely determined by the marked slowdown in India where growth fell to 6.9% from 8.4% in 2010, mainly reflecting its marked monetary tightening in the face of persistent inflation and slumping investment. Going forward, while East Asia’s growth will moderate to 7.4% in 2012, growth in Southeast Asia is seen picking up to 5.2% for 2012 and to 5.7% in 2013.

Inflation to moderate in 2013

Across subregions, higher food and fuel prices drove up inflation in developing Asia to 5.9% in 2011 from 4.4% in 2010. In Central Asia, South Asia, and the Pacific, average inflation rates reached around 9% in 2011 while it was more moderate in East and Southeast Asia, where inflation continued to be contained at around 5%. However, inflation in developing Asia is set to recede as economic activity softens. Assuming relatively steady global oil prices and easing food prices in 2012, regional average inflation is forecast to slow to 4.6%. Besides the external price developments, domestic policies may play a role in, for example, South Asia, where some reduction in heavy fuel and power subsidies are expected, and will set a floor for any reduction in inflation.


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