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12 Mar 2013
Forex Flash: Asia sees overheating risks - Nomura
Nomura economists have taken a look at the upcoming risks for Asia ex. Japan and have presented a bitesize summary of their views looking forward.
They begin by emphasizing that the bulk of their focus is on overheating risks, but they are cognisant that a Chinese slowdown could take the steam out of Asia´s economies. Focusing on China, the feel that GDP growth should stay strong in H1, but the debt build-up and rising inflation should thwart the recovery in H2. Flipping to Korea they are expecting the BoK to stay on hold at 2.75% through 2013 as growth and inflation should rise modestly from a low base. In India, they feel that with the structural fiscal deficit still high, they expect weak growth, a high current account deficit and little room for rate cuts. Switching to Australia, they believe that with the peak in resource investment approaching, the RBA will cut rates by 25bp in 2013. Finally, in Indonesia, they feel that an increasingly uncertain policy environment could lead to delays in reforms and sustained current account deficits.
They begin by emphasizing that the bulk of their focus is on overheating risks, but they are cognisant that a Chinese slowdown could take the steam out of Asia´s economies. Focusing on China, the feel that GDP growth should stay strong in H1, but the debt build-up and rising inflation should thwart the recovery in H2. Flipping to Korea they are expecting the BoK to stay on hold at 2.75% through 2013 as growth and inflation should rise modestly from a low base. In India, they feel that with the structural fiscal deficit still high, they expect weak growth, a high current account deficit and little room for rate cuts. Switching to Australia, they believe that with the peak in resource investment approaching, the RBA will cut rates by 25bp in 2013. Finally, in Indonesia, they feel that an increasingly uncertain policy environment could lead to delays in reforms and sustained current account deficits.