Policy stimulus to support growth in Asia

The ongoing debt crisis in the euro-zone is likely to weigh on growth in Asia in 2012-13. Although the region’s most open economies are set to slow quite sharply, we forecast that growth in the region as a whole will ease to only a little below trend this year. Healthy economic fundamentals, rising intra-regional trend, and plenty of policy stimulus are all factors which will support growth this year. Currencies and equity markets are likely to weaken in 2012, before recovering in 2013 as global risk appetite recovers. Government bond yields will remain volatile, but should generally trend lower over the next couple of years.