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How long will the recovery last?

A pick-up in exports will lift growth in Emerging Asia to a five-year high in 2017, but mounting domestic headwinds means that this is unlikely to be sustained. We expect growth to slow in 201819. Having peaked at the start of the year, inflation has dropped back in recent months and should stay subdued over the coming quarters. With inflation set to stay low and given the headwinds facing domestic demand, policymakers will look to keep monetary policy loose. Our forecast is that most central banks will keep interest rates unchanged not just until the end of this year, but throughout 2018 as well. We expect most currencies in Emerging Asia to remain fairly stable against the US dollar in the near term, but some appreciation is likely in 2018-19. Although we don’t expect Asian equities to gain much further ground this year, the outlook for next year is better.

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