Economists slash growth forecasts for Asian economies in 2013
BANGALORE (Reuters) - Asian economies will see weaker growth this year than was expected just three months ago, despite expected policy easing by central banks as inflation pressures taper off, a Reuters poll showed on Wednesday.
Over 250 economists polled in the past two weeks have cut growth estimates for 2013 for a majority of the largest economies in the region, in an indication the euphoria with which the year started may be short-lived.
That marks the fourth straight downward revision in as many polls, with the Singapore, Hong Kong and South Korean economies bearing the brunt of the downgrades -- between 0.4 to 0.5 percentage points.
"Global demand will still be sluggish this year but exports for Asia as a region will grow faster in January and February," said Wendy Chen at Nomura.
"Gross domestic product growth will pick up in the first part of the year and then slow down in the second half."
Median forecasts were upgraded for only China, Japan and the Philippines in the poll.
China's economic growth is likely to rebound this year to 8.1 percent in 2013 from 7.8 percent last year, the weakest pace in 13 years, though its recovery is expected to be sluggish.<ECILT/CN>
Economists polled in October had forecast 7.8 percent growth for China this year.
Still, even though the optimism for the region as a whole for 2013 has dimmed, it will prove to be a much better year than last, analysts said.
But risks to even modest growth projection are aplenty. Much depends on how China, the world's second-largest economy, performs this year and on how the United States and euro zone economies tackle their debt woes.
The U.S. government hit its debt ceiling at the end of last year and is now employing special measures to meet its financial obligations, but those steps could be exhausted by March. Uncertainty over how that hurdle will be crossed has caused businesses to put hiring and expansion plans on hold.
"While the fiscal drag in the U.S. will no doubt ripple through the region (emerging Asia), a sense of strengthening underlying momentum and fading tail risks will provide support for growth," wrote Bruce Kasman, head of economic research at JP Morgan, in a note to clients.
Analysts also raised growth forecasts for Japan for the fiscal year ending March 2014 after the government announced new stimulus spending and on expectations of further policy easing by its central bank, which is weakening the yen and making the country's exports more competitive again. <ECILT/JP>
The Bank of Japan on Tuesday announced its most determined effort yet to end years of economic stagnation, saying it would switch to an open-ended commitment to buying assets next year and doubling its inflation target to 2 percent.
Likewise, India's economy is expected to pick up steam this year after its worst performance in a decade as a slew of reforms take hold and the central bank eases policy to spur growth.
INTEREST RATES TO REMAIN ACCOMMODATIVE
Until recently most central banks in the region were biased towards holding interest rates steady or tightening policy due to concerns about inflation, even in the face of weakening growth.
But with price pressures expected to cool a little, economists are now penciling in some rate cuts.
Inflation estimates were either downgraded in the poll or remained constant over the last survey for most countries in the survey, with the Australian, Indian and South Korea central banks expected to cut interest rates this year.
While the Reserve Bank of Australia will cut its benchmark rate by 25 basis points to 2.75 in the second quarter, the Reserve Bank of India is expected to slash its lending rate by 100 basis points over the year.
The Bank of Korea will cut its base rate to 2.50 percent from the current 2.75 percent by March, according to economists.
Most others central banks will keep rates on hold, the poll showed.
With tepid growth seen for much of the region, analysts have said currency strength also will be a major concern for policymakers in some more export-reliant Asian economies.
Finance ministers in South Korea and Thailand warned on Wednesday against excessive appreciation of their as investors flock to Asia seeking higher returns.
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