Weak growth to prompt policy easing

We expect GDP growth across Emerging Asia to be very weak this year, with a number of countries set to grow at their weakest rates since the global financial crisis. A key drag will come from falling exports – our forecasts for the global economy suggest that external demand will remain very weak. A downturn in the electronics sector will act as a further headwind. To offset this weakness, policy is likely to be loosened. A number of countries have expansionary budgets planned for this year. The relatively strong fiscal position of most countries means policy could be loosened further if required. Monetary policy is also likely to become more supportive. We think a number of central banks, including those in China, India and Korea, will cut interest rates this year. Finally, we believe falls in US stock markets will trigger a deterioration in global risk appetite, leading to renewed declines in Asian currencies and equity markets this year.