Upswings to stay impressive for a while (Q1 10)

The trade-dependent economies will eventually see slower GDP growth later this year and in 2011 as the global upswing loses momentum. But Asia’s rebound will not come to a complete halt and growth, by some distance, will stay higher than in any other part of the world. What’s more, Asia’s domestically focused economies should see sustained improvement in both 2010 and 2011. As a result, we expect that Asian currencies and stocks will end 2010 stronger and higher than where they are now. There are three risks. Firstly, the exit from stimulatory policies could be badly-handled. The second and related risk is that inflation develops into a bigger problem than we currently envisage. Finally, asset market bubbles develop and then burst.