After a poor start to 2015, we expect growth in Emerging Asia to pick up in the second half of the year as the benefits of lower oil prices and loose monetary policy filter through to the domestic economy. Further ahead, a slowdown in credit growth and poor prospects for exports will limit the potential for a substantial acceleration. Inflation is likely to rebound strongly in the coming months as the downward pressure on inflation from lower oil prices fades. Rising inflation will prompt some central banks to start hiking rates from next year. But tightening, when it does come, is likely to be very gradual. Most currencies look set to lose ground against the US dollar over the forecast period, with the Malaysian ringgit and the Indonesian rupiah likely to experience the biggest losses. Asian equities should record steady gains over the next couple of years, helped by decent growth prospects. Finally, low local policy rates and the healthy fiscal positions of most countries should help to keep government bond yields low.
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