Asia is poised for economic acceleration next year, as China may have improved growth momentum, while regional inventory correction fades and cheap liquidity abounds, HSBC PLC said in a report yesterday.
Consequently, a rise in inflationary pressures may take center stage resulting in Asian central banks nudging interest rates higher, the report said.
“Barring another global financial tizzy, Asia is set for a ramp-up in growth, led by China next year,” said Frederic Neumann, co-head of HSBC Asian economic research.
Major economic bellwethers in China, the largest destination for Taiwan’s exports, suggest the worst of the slowdown is over and GDP growth should accelerate to 8.6 percent next year, Neumann said,
The regional trade cycle should stabilize, although Japan’s shaky economy presents some risks, Neumann said.
Meanwhile, liquidity is again pouring into the region, where interest rate cuts have spurred consumption and investment spending, albeit gently, he said.
“This financial stimulus will sustain the current pick-up in growth in the absence of another knock prompted by the US fiscal cliff or the mess in Europe,” Neumann said.
The New Taiwan dollar rose for the second straight session to NT$29.09 against the US dollar yesterday in Taipei trading, central bank data showed, as capital flows to Asian markets on recovering risk appetites following the US elections.
Regional central banks appear more comfortable with the economic outlook, Neumann said, noting that governments in Australia, South Korea, Indonesia and Malaysia have kept interest rates on hold.
So far this year, labor markets across the region have been resilient, with unemployment rates generally declining even as growth slowed, supporting activity in the service sector and preparing for future inflationary pressures, he said.
Exchange rate appreciation, though helpful in principle, is progressively less effective in addressing regional price problems, Neumann said.
“That leaves interest rates that need to rise, if only to help manage inflation expectations,” he said.