By the fourth quarter of this year, in our opinion, Asia’s growth will outpace the growth of the USA and Europe by about 450 basis points.
Chetan Ahiya, chief Asian economist at the investment bank, said in a webinar. Citing reasons for his optimism, he said that healthier growth rates are expected in Asia, while lower in the West. In addition, a broad recovery in China may come in the second half of this year, while three large Asian economies – India, Indonesia and Japan – are also showing strong domestic demand.
“We certainly expect growth in these two economies to be constrained by the fact that they have a significant inflation problem,” Ahiya said, referring to the United States and Europe. He added that central banks in these markets are forced to raise interest rates to restrictive levels in order to keep inflation in check.
There has been no interest rate shock in Asia as in the United States and Europe
– he said, adding that Asian inflation has risen to almost half the rate compared to the other two regions. The US inflation rate is well above the Federal Reserve’s annual target of 2%.
Inflation slowed to 4% in May, the lowest level in two years, after peaking at 9.1% last June. The Federal Reserve stopped raising interest rates yesterday, as the fight against inflation has shown promising results so far.
Last month, the central bank raised interest rates for the 10th consecutive time in more than a year, the fastest tightening of monetary policy by the Fed since the 1980s.
Likewise, inflation in the eurozone fell to 6.1% in May, the lowest level since February 2022. The European Central Bank raised its main interest rate from -0.5% a year ago to 3.25% in May, the highest value since November 2008. The European Central Bank takes Interest rate decision today, as it is expected to raise interest rates by 25 basis points.
“In Asia, the problem of inflation has not been so severe. We believe that inflation in the region has peaked,” he said. “By September and October, inflation in 80% of countries in the region may be back in the comfort zone of central banks.”
Among the central banks in Asia, South Korea, Australia, India, Indonesia, Indonesia and Singapore also decided to raise interest rates.
Another driver of Asian growth is the Chinese recovery outlook for the second half of the year. According to the bank’s forecast, China’s growth will be 5.7% in 2023 compared to 3% last year.
The bank also expects the Chinese government to announce more stimulus measures in the form of easing rules for the real estate sector and an infrastructure financing program worth about $1 billion. China cut medium-term interest rates on Thursday and short-term interest rates on Tuesday.
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