• Growth slowed considerably in the Asian Tiger economies late last year and remains relatively sluggish in 2012. However, some partial indicators suggest that conditions have improved modestly more recently, bolstered by improvements in the US economy, and an apparent v-shape recovery in Thailand from last years floods. However, demand for exports from advanced economies is likely to remain soft, at least in the near term, and will continue to be a headwind for domestic activity. Indonesia has been a big exception to the slowdown – its economy is much less export driven and it has maintained very solid growth. Overall, however, our 012/13 Asian growth forecasts are largely unchanged.
• Persistent inflationary risks present a difficult situation for policy makers, facing the potential for stagflation in an uncertain global environment. Inflationary pressures have generally eased across the region, although to varying degrees, but risks from elevated commodity prices (particularly oil) may limit the potential for policy easing if needed.
• In this edition, we continue our examination of the Asian Tiger’s international financial linkages and the potential risks from a sudden capital withdrawal. The most immediate risks stem from European bank deleveraging, but the more remote risk of a sudden confidence shock escalating into a destabilising withdrawal of hot money would be more of a problem were it to occur.
• Overall, Asian Tiger economies should experience less financial disruption from deleveraging than other emerging economies, particularly emerging Europe. However, European bank participation is still large enough in most countries to cause significant disruption to Asian credit markets. More broadly, Asian economies remain vulnerable to capital fluctuations, albeit less so post Asian Financial Crisis thanks to improved capital management policies.

For further analysis download the full report.

• Asian Tigers Economic Update – April 2012 (PDF, 1102kb)