China and India holding back regional rebound

GDP growth in Emerging Asia over the next couple of years is likely to remain lacklustre by recent historical standards. The main reason for the subdued outlook is poor growth prospects in the region’s two biggest economies: China and India. The rest of the region should record a gradual recovery on the back of loose monetary policy and a pick-up in export demand. Given the improving outlook, most central banks in the smaller Asian economies will start to hike interest rates next year. However, with inflation set to remain fairly low, the pace of tightening is likely to be gradual.