Growth in emerging Asia will be mixed – ANZ

MANILA, Philippines - Economic growth in emerging Asia will be mixed, some muted by political events while others humbled by economic fundamentals in the first six months, according to the Australia and New Zealand Banking Group Ltd. (ANZ).

India (the world’s largest democracy) and Indonesia (the world’s third largest), both have elections in April while lingering political uncertainties in Thailand continue to choke up economic activity.

 â€œThe economic cycle for these three economies may be unusually muted and resistant to the machinations of the political cycle in 2014, with fiscal slippage in 2015-2016 as more of a risk,” ANZ said in a report.

In contrast, the outlook for the Philippines in the first quarter remains constructive, as business confidence is favorable on the back of sufficient access to credit while public investment marches on with government’s huge infrastructure projects.

 â€œMeanwhile, we are still cautious of inflationary pressures,” it said.

The political stalemate in Thailand is leading to delays in key transfer payments to important constituencies such as farmer and other key interest groups, the report said.

The key challenge for the three economies will be to resist populist measures that deteriorate fiscal and current account balances further.

While the Philippines leads the way for regional tightening starting second semester of the year, India and Indonesia have already tightened their monetary policy.

In contrast, Thailand has been easing policy in the past few months. Monetary policy normalization will likely commence after the first quarter of 2015, making it one of the laggards in the policy tightening cycle, the report said.

ANZ’s forecast for China’s economic growth has moderated to 7.2 percent.

 â€œThat is on the premise that the growth target would be lowered to seven to 7.5 percent in thr final two years of the 12th Five-Year Plan in order to allow room for structural reforms and to address the problem of over-capacity, especially in heavy industries,” the report said.