Asian economies, resisting appreciation of their currencies against the slumping US dollar, need to change their economic tack and demonstrate flexibility next year, economists say.
After a robust year during which global growth has been the strongest in nearly three decades, the tail winds are unlikely to be as positive next year, they predict.
Adjusting will bring downside risks to growth, but "every cloud has a silver lining," noted the Standard Chartered Bank team in its latest Asian Quarterly report.
To address its huge trade deficit, the US has allowed the greenback to slide to make its exports more competitive.
The Singapore and New Taiwan dollars, Thai baht and Indian rupee are up by around 8 percent to 10 percent. In recent months, South Korean policymakers have allowed the won to extend its revaluation to around 17 percent, and the yen has risen by 26 percent from its bottom in 2002.
In Europe the euro has surged by 60 percent since it bottomed around US$0.83 in early 2002. Since the Hong Kong dollar and Chinese yuan are pegged to the greenback, the euro has gone up as much against them as it has against the US dollar.
"Asia has the opportunity to enter a new phase of development," the bank's economists maintain.
"Instead of focusing on external competitiveness, the broad-based US dollar decline will allow central banks to focus on domestic demand by either cutting rates, or at least keeping interest rates low," they added.
East Asian economies excluding Japan are forecast to experience a sharp drop in their overall growth rate to 6.3 percent next year compared with an expected 7.6 percent for this year, according to a Japan External Trade Organization forecast.
Growth has been driven by the thriving Chinese economy and buoyed by strong showings of Hong Kong, South Korea and Taiwan in addition to Association of Southeast Asian Nations members Singapore, Indonesia, Malaysia, the Philippines, Thailand and Vietnam.
China leads the pack, registering robust growth of 9.6 percent this year with Singapore emerging the second fastest despite cutting its growth forecast to 8 percent to 8.5 percent from 8 percen to 9 percent following a sharp slowdown in the third quarter.
Hong Kong is expected to grow at 7.5 percent, Taiwan at 5.9 percent and South Korea at 4.9 percent.
Driven by double-digit export growth and recovery in both domestic investment and spending, Malaysia, the Philippines, Indonesia, Thailand and Vietnam are likely to grow by 6 percent overall.
That rather rosy scenario is set to change, however, as China's economy slows and the others shift down as well.
Since the 1997 to 1998 financial crisis, the region has been "notably reluctant" to allow currencies to appreciate in order to rebuild reserves and be externally competitive.