Regional prospects: Firing on all four cylinders?
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Regional prospects: Firing on all four cylinders?

The general picture’s good and the four biggest economies are simultaneously on a growth path.

The region’s analysts have been busy refining their forecasts for Asian economies in 2006. The consensus appears positive on the whole, with real GDP growth for Asia ex-Japan of 6.5% to 7% projected. That’s a pretty respectable performance at twice global growth.

Rob Subbaraman, regional economist with Lehman Brothers in Tokyo and one of the more bullish analysts around, believes Asia enters 2006 in a cyclical upswing “underpinned by an upturn in global electronics demand, competitive currencies and negative or close to zero real policy interest rates in most countries”. He also points to Asia’s better economic fundamentals as positive factors, including a healthy balance of payments, a strong financial sector and a rising middle class that suggests that domestic demand should start to play a greater role in driving economic growth in the years ahead.

Asia growth rates, 2000 to 2005
Source: UBS

Jonathan Anderson, chief economist, Asia, at UBS, is less convinced on the issue of domestic demand. He points to his team’s forecasts of export growth for Asia ex-Japan and earnings growth forecasts for MSCI Asia ex-Japan (see chart).

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