05/10/2013

China/Asia Economic Outlook: Second Quarter 2013

Asian economies continue to grow amidst a gradually improving external environment and accommodative policies. While the pace of growth in early 2013 has been somewhat slower than expected, we are keeping most of our projections unchanged, except for a downgrade to India.

In China, although Q1 GDP growth disappointed to the downside, we have maintained our 8.0% growth projection for 2013-14. External demand is improving, and subdued inflation provides room for policies to remain supportive.

Risks to the outlook are tilted to the downside due to weaker-than-expected growth outturns and a still-fragile external environment. In China, rising domestic financial fragilities pose a constraint on further policy easing. Elsewhere in the region, currency tensions from the weakening yen, capital inflows, and asset price bubbles pose challenges to policymakers.