Weakest growth in a decade, rate cuts by year-end

Emerging Asia this year is likely to grow at its weakest rate since the global financial crisis. Although fiscal policy should help to support growth in most of the region, this is likely to be offset by the lagged impact of last year’s monetary policy tightening in many countries. A slowdown in global growth means exports are likely to weaken, acting as a further drag. Our growth forecasts for this year are below consensus for every country in the region apart from India. With growth slowing and inflation set to drop back, we think the regional tightening cycle is likely to come to an end. China, India and the Philippines are among the countries likely to cut interest rates before the end of the year. Finally, we believe a further deterioration in global risk appetite and renewed falls in the US stock market will weigh heavily on Asian currencies and equity markets over the coming year.