Asia Economic Outlook

As 2016 commences, and end-of-year data for 2015 is gradually released, we can see that the outlook for the Asia Pacific region as a whole has altered only slightly since December, with all eyes still on China as growth forecasts for the world’s second largest economy edge downwards. Latest developments will do nothing to ease such concerns as manufacturing PMI surveys continued to show a contraction in activity in December. Moreover, the People’s Bank of China’s recent decision to modify its exchange rate policy is seen as a sign that it is struggling to revive the flagging economy. The economic slowdown on the Chinese mainland is undoubtedly having a sizeable negative impact on neighbouring Taiwan, with the island once again likely to have experienced sluggish growth during the final quarter. The weak finish to 2015 is backed up by key economic indicators for November, which revealed a -4.9% (y-o-y) fall in industrial output and a -16.9% (y-o-y) drop in exports. Elsewhere in the region, Q3 GDP data for New Zealand came in above market expectations, with the economy growing by 2.3% (y-o-y). Last month the Reserve Bank of New Zealand lowered the official cash rate in a bid to push inflation – which stood at 0.4% (y-o-y) in Q3 – back up to within the reserve bank’s 1-3% target range.

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