The Year of the Monkey could prove challenging for Asian economies, with growth remaining subdued, according to a global research report published by HSBC. The report says exports are unlikely to rebound amid lacklustre global demand, and investment looks set to cool further.
Even as growth in China continues to slow, lower commodity prices are not lifting growth in Asia, thus hurting exporters.
“Then there’s weaker Chinese appetite for machinery and consumer goods, which is keeping a lid on trade even as shipments to the West are stabilizing. Add to this increasing worries over China’s currency – unfounded in HSBC’s view – and it’s easy to see why investors are feeling jittery,” the report states.
It adds that in 2016, growth could ease further and intensifying disinflation could add to the challenges. “In short, the Year of the Monkey is not going to offer an easy ride. But, hang in there. With the right reforms, and yet more easing where possible, Asia should make it through its current rough patch,” the report says.
What explains the resilience of emerging Asia in recent years is debt. “Leverage filled the void left by tired consumers in the West after the Global Financial Crisis. But that strategy has run its course. Credit saturation and rising debt servicing burdens – partly due to rising US dollar interest rates abroad, partly due to intensifying disinflation at home – are putting a break on domestic spending,” the report says.
It adds that interest rate cuts in The Year of the Monkey could prove challenging for Asian economies, with growth remaining subdued.