South East Asia to outperform

Emerging Asia began the year with plenty of momentum, but the recovery is already showing signs of losing steam. Growth in 2013-14 is likely to be slower than has been the norm. Lacklustre global demand will weigh heavily on the region’s most trade-dependent economies. Meanwhile, structural problems will hold back growth in the region’s two biggest economies, China and India. Prospects are brightest in South East Asia, where growth is being supported by strong domestic demand. We expect inflation to remain low by historical standards over the next year, which will give central banks scope to either keep interest rates close to their current low levels or loosen policy further.