Asian growth outlook dips

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Asian growth outlook dips

Is Asia’s economic growth grinding to a halt due to Abenomics and the slower than expected recovery of major economies?

Major investment banks have been revising their outlook on many Asian economies, particularly those that are relatively more export dependent than others.

According to the Korea Center for International Finance (KCIF), 10 major investment banks such as Morgan Stanley, JP Morgan, Barclays, Nomura and Deutsche Bank have lowered their economic growth outlook for 11 Asian countries, including China, India and Indonesia.

While Korea’s economic outlook, as well as that of the Philippines, remained unchanged, Japan was the only Asian country whose outlook was raised. That was largely due to the weakening of the Japanese currency as a result of the monetary easing policy championed by Prime Minister Shinzo Abe.

The revision wasn’t sharp, but still reflected concerns of a slower than expected recovery.

Thailand saw the biggest change, its projection for this year was down 0.2 percentage points from May’s forecast to 4.9 percent.

China, as well as other Asian markets such as India, Indonesia and Malaysia, saw projections dip 0.1 percentage points. China’s growth outlook was revised to 7.8 percent.

While Morgan Stanley and the German financer Deutsche Bank were more optimistic over China’s growth, forecasting a 8.2 percent on-year expansion, Nomura was more conservative as it forecast a 7.5-percent growth.

Korea’s forecast remained the same, averaging 2.8 percent. While Barclays and Morgan Stanley had a more optimistic outlook with 3.3 percent growth this year, JP Morgan and Bank of America sees Korea’s growth will reach between 2.5 percent and 2.6 percent.

It has been recently reported that the Korean government is considering raising the nation’s outlook from the previous 2.3 percent to 2.8 percent, since the 17 trillion won ($15 billion) supplementary budget, including the 12 trillion won that will be used to cover the tax shortfall, passed the National Assembly last month while the central bank that same month further loosened its monetary policy by lowering the key borrowing rate from 2.75 percent to 2.5 percent, which was the first change since October 2012.

Additionally, the April 1 real estate measures that includes tax benefits on selling apartments is also contributing to the government’s revision on its outlook.

Since the April 1 measure was announced, the real estate market has been recovering with transactions growing compared to a year ago, while real estate values show signs of moving up.

The Finance Ministry’s economic outlook has been more conservative than even that of the central bank’s forecast at 2.6 percent.

The Finance Ministry is scheduled to announce its revised economic outlook for this year today.

Japan was the only country whose projection was raised - 0.4 percentage points up to 1.7 percent.

“The global economy in the second half will likely move away from a soft patch,” said Park Mi-jeong, KCIF economist.

However, even these projections could change due to fears of an early ending of the U.S. quantitative easing and increasing instability in the global market.

By Lee Ho-jeong [ojlee82@joongang.co.kr]

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