Asia’s upswing will slow but is unlikely to stall (Jul 10)

The best of the rebound in exports and manufacturing has now come through and GDP growth across Emerging Asia looks set to slow in Q3 as the global upswing loses some momentum. Asia’s trade-dependent economies will inevitably suffer the most but the slowdown on the way should be moderate rather than severe. Domestic demand and intra-regional trade will probably continue to provide powerful support. Moreover, Emerging Asia also has the policy flexibility to ensure that any downturns are not too sharp. We continue to expect that central bank policy rates across Asia will move up during the course of Q3 and that regional currencies will climb against the US dollar.