Asia Outlook for 2017: No wiggle room to support economic growth

· Stronger growth in the US is not going to lift Asia growth as much this time around as the region is now more dependent on China, whose demand for imports is to remain subdued.

 ·  Inflation is expected to pick up in Asia, with India having the highest rate and the Philippines having the strongest hike.

 ·  As opposed to 2016, a tightening FED will leave hardly any space for Asian central banks to ease monetary conditions to support growth, let alone higher inflationary pressures. Asian currencies will absorb most of the shock although tighter monetary policies will cushion the depreciation trend. Fiscal policy, too, will generally be prudent, China and Japan being the most notable exceptions.

 ·  All in all, we expect Asia’s GDP growth to be flat in 2017 as there is no wiggle room to support growth given higher inflation, a more hawkish Fed, and limited fiscal space. Even with no acceleration in economic growth, the Asian region will still contribute by far the most to global economy.

 For more details, read our NATIXIS 2017 Asia outlook

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