Growth to slow from a five-year high

Growth in Emerging Asia reached a five-year high in 2017 but we think that it has now peaked and will slow gradually over the next couple of years. The main headwind will come from the export sector. Despite the decent outlook for the global economy, the recent surge in export volumes looks unsustainable. Meanwhile, domestic demand is also likely to struggle in many places, further weighing on prospects. With growth set to slow and inflation under control in most of the region, policymakers will be in little hurry to tighten policy. Whereas the consensus and markets are expecting interest rates to rise across much Asia in 2018-19, we still think interest rates will be cut in a few countries (China and Indonesia), and even for those that are likely to hike (Korea, India and Malaysia), tightening will be gradual.