While Asian economies will continue to grow, inflation could explode on the back of such growth, according to an HSBC report.
“The risk for Asia, in short, is not lack of growth, but the inability of policy-makers to anticipate the implications of its strengths,” the report said.
The report said Asian economies risked rapid inflation due to central banks in Asia resisting raising interest rates and “stay[ing] aloof for longer than the markets may like”.
As monthly inflation readings began to rise, political authorities remained “overly wedded to perceived growth risks form a Western double dip”, the report said.
The growth momentum in the region, however, would continue, it said.
“As Asia enters 2010 in robust shape … growth should settle into a comfortable pace for a while,” it said.
“As a result we expect the region, excluding Japan, to grow by 7.8 per cent with China and India leading the way. Given our longstanding bullish view on the region, we have left most of our forecasts untouched as these already anticipated events continue to unfold.”
Over the next quarter, HSBC said it expected China to grow by 9.6 per cent and India by 8.5 per cent, compared with Australia, which was forecast to exapnd by 2.6 per cent.
