Arjen van Dijkhuizen, Senior Economist at ABN AMRO, suggests that the emerging Asia is also feeling the heat from escalating US-China tensions and from rising rates in advanced economies.
Key Quotes
“Portfolio inflows have fallen, financial market pressures have intensified and regional financial conditions have tightened. Despite this general contagion, differentiation based on country-specific fundamentals still do play an important role. That explains why countries with external deficits (India, Indonesia, Philippines) have been faced with the strongest currency pressures, although much less than hard hit EMs such as Turkey and Argentina.”
“However, if we look at stock market performance, even the more creditworthy countries have underperformed due to the US-China conflict. Meanwhile, regional growth was strong in the first half of this year, accelerating to a two-year high of 6.4% yoy, as India’s acceleration offset the resumption of China’s gradual slowdown. Still, recent indicators signal that regional growth momentum is weakening.”
“Putting all pieces together, we think that regional growth peaked in the first half of 2018 and will slow into 2019. That said, we only expect a moderate slowdown, partly because Indian growth is expected to remain solid while China is adding fiscal stimulus and is tweaking its financial deleveraging campaign to offset drags from previous targeted tightening and trade tensions.”
Share
