AsiaIn this week’s letter, we look back at and review some of the key trends that have shaped the outlook for Asia this year. While growth picked up in several parts of the region earlier in the year, signs of a slowdown have emerged as we head toward year-end (Chart 1). Disinflationary trends have continued in many economies, welcome news for central banks across the region. However, the growth and inflation landscape remains uneven. Economies like Japan and India have experienced slower growth, while others such as Singapore, Taiwan, Malaysia, and Vietnam have seen improvements, in part driven by strong demand for electronics and semiconductors (Chart 2).
On monetary policy, the anticipated regional alignment with the Fed's easing cycle has not fully materialized. Instead, many central banks in Asia have opted to keep policy rates higher for longer, thanks to the influence of various domestic factors (Chart 3). Touching on semiconductors, key players like Taiwan and South Korea have reaped significant benefits from the AI-driven surge in demand, while China’s pre-emptive purchases of semiconductor equipment have finally started to taper off (Chart 4). Turning to financial markets, Asian equities largely tracked their US counterparts through early October. However, market expectations were disappointed by China’s underwhelming stimulus plans, triggering sell-offs across regional markets, while US equities maintained a broader upward trend (Chart 5).
Lastly, in the political arena, both India and Japan saw their incumbent governments retain power, although with notable losses in parliamentary seats, raising some concerns over future economic policy direction (Chart 6). And as we head into December, uncertainty remains—particularly following President-elect Trump’s recent victory in November. We will continue to explore these developments and their potential impact for 2025 in next week’s publication.
Growth and inflation Asia-Pacific economies had plenty to celebrate this year, as growth strengthened on average while inflation remained well-behaved in many economies. As shown in Chart 1, GDP growth rates rose from the lows of 2023, averaging just under 4% y/y in both Q1 and Q2. That said, while growth momentum persisted in some economies during Q3, it slowed further in many others. Meanwhile, the region experienced further disinflation, with average CPI inflation falling from a peak of 2.9% y/y in May to just 2% in October—a level at which many central banks would likely feel comfortable. However, a deeper dive into economy-specific nuances reveals disparities in the relationship between growth and inflation across the region's economies—an issue we will explore in the next section.
