Asia Weekly Watch: Growth moderating amidst high inflation

Summary

As flagged in recent publications (Asia Outlook), we have been expecting a slowdown in Asia's growth momentum on headwinds from rising oil prices, supply disruptions in Japan, and financial market tensions in Europe. Recent indicators bear this out. Industrial production in Korea and PMI in China (Highlights) point to moderating trends, and first quarter GDP in India disappointed to the downside (Chart 1). That said, we expect the slowdown to be temporary, confined mainly to the second quarter, and it could provide some welcome relief from overheating pressures. Nevertheless growth figures remain strong, as does inflation which, in spite of some easing, is still above target ranges in most economies. To counter inflation pressures, the Thai authorities raised interest rates this past week for a forth time this year, to 3.0% (Chart 2).

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