The outlook from Asia is strong, Deutsche Bank’s economists note, as they wonder in a monthly regional report is this “As good as it gets?” The Asian economy, while displaying signs of strength, is also the subject of flashes, the report notes.
It is exports that drive the Asian economy
Asian exports have rebounded sharply in the first quarter of 2017, in part dispelling the negative notion that the export engine had suffered a structural break. The “Asian export puzzle” is the primary performance driver behind higher growth forecasts in the region, Deutsche Bank’s Asian Economics research team notes in an April 7 report.
Looking at Asia one sees an idiosyncratic picture of regional nuance, from strong growth momentum in China and Hong Kong to bottoming inflation in Indonesia and improving political risk in India while the economy is on the mend in Thailand.
But amid this positive past performance backdrop, concerns appear on the horizon. With the US potentially carrying out a trade review in the region and North Korea representing a troubling fly in the economic ointment, future growth is not as solid a given as one might expect. On March 31, President Trump signed two executive orders to review the US trade deficit and strengthen anti-dumping rules and enforcement, a point of “apprehension,” particularly among North East Asian economies.
“The Korean authorities did not rule out the possibility of Korea being labeled a currency manipulator, while the Central Bank of China (CBC, Taiwan) has taken pains to avoid such a labeling, noting that had not intervened in the FX market and that Taiwan’s trade surplus with the US would fall significantly if the arms deal were approved,” the report observed.
Overall, however, the Deutsche Bank research team of Diana Del-Rosario, Juliana Lee, Michael Spencer, Li Zeng and Zhiwei Zhang don’t think the US trade review will necessarily weigh on global trade. “We think that if it focuses on ensuring adherence to international norms, rules and agreements, its efforts would then be positive for global trade,” they wrote. However, there are concerns.
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