ANZ sees 2016 and 2017 among most challenging years for Asia

SINGAPORE – In a new research report, ANZ Bank predicts 2016 and 2017 will be two of Asia’s most challenging years, with the ongoing economic slowdown in non-Japan Asia extending into an unprecedented fourth and fifth year. “The current slowdown can no longer be explained in cyclical terms alone,” ANZ says. “More structural elements are now in play.”

ANZ says growth across Asia had slowed markedly from 2014 into 2015 on the back of multiple influences.
“The engineered rebalancing in China, the consequent collapse in commodity prices, the lacklustre US household sector and weak global capex all culminated into what we christened the ‘Asia trade recession’,” the bank says.
“For the open trading economies of Asia, the above factors were clearly a challenging mix. 
“In considering the 2016-17 outlook, we need to include further challenges. For instance, China’s slowdown could intensify, while the US Federal Reserve rate hike cycle and USD strength may strain balance sheets with foreign currency denominated debt.
“As a result, Asia could continue to swoon under the synchronised and persistent nature of these global challenges.
“Although a five-year growth deceleration is an unprecedented dynamic in Asia’s modern economic history, at the same time, the foundations for a medium-term structurally stronger Asia appear to be falling into place.
“Medium-term anchors, such as the commencement of the ASEAN Economic Community and the introduction of the Asia Infrastructure Investment Bank (AIIB), should see investment and infrastructure begin to flourish.
“Currency depreciation is proving to be insulating for domestic income and some ASEAN economies are displaying nimbleness by evolving into what appears to be a more services-oriented  economy and the new global services supply chain environment that is developing alongside that.
“Certainly, it is not all doom and gloom, but the balance of risks around our regional views remains skewed to the downside.” www.live.anz.com (ATI).