Asia set to weaken but still outperform

A slowdown in developed economies in 2012-13 is set to pull down growth in emerging Asia to a below-trend pace. However, the region’s healthy fundamentals mean that emerging Asia should once again be the fastest growing area of the world economy. Inflation has peaked in most countries and is set to fall gradually over the next year, which in turn will give most central banks room to cut interest rates. Currencies and equity markets are likely to weaken further before the end of 2011, before recovering in 2012-13.