Asia's rapid economic growth will moderate slightly in 2011 even as policymakers combat rising prices with higher interest rates and try to keep local currencies from appreciating too sharply, a Reuters quarterly poll showed. Most of the 13 Asia-Pacific economies covered in a Reuters survey are expected to see growth cool in 2011 from 2010 as economic recoveries in the United States and Europe remain uneven and China steps up its efforts to fight inflation and asset bubbles.
At the same time, higher prices for food to fuel mean governments and central banks in the region will have to tighten monetary policy further or take other measures even if it risks curbing growth, economists said. China's economy is expected to expand by 9.3 percent this year, throttling back from double-digit growth in 2010, but inflation is now tipped to quicken to 4.3 percent, a much faster build-up of price pressures than economists had expected in a similar Reuters poll in October.
Likewise, inflation in India is now seen at 8.8 percent, up from 8.3 percent expected in the October poll. The prospect of further tightening is already spooking some foreign investors who flocked to the region last year, drawn by its robust growth and higher returns. Indonesian stocks have recoiled after a sizzling 46 percent gain in 2010, with selling attributed to profit taking and concerns that its central bank may be behind the curve in fighting price pressures.
China will likely record its slowest annual growth of the year in the first quarter of 2011, but it will still be a hearty 8.7 percent, giving the government more confidence to tighten policy further to rein in racing inflation, according to the Reuters poll. The median forecast of 27 analysts is for China's gross domestic product to grow 9.3 percent in 2011, stronger than the 8.9 percent forecast in the previous poll published on October 14.
India, Asia's third-biggest economy, is set to grow at the same robust pace seen over the last fiscal year, averaging at 8.7 percent in the year-ending March 2011, before slowing slightly to 8.5 percent in the following year, the poll showed. These figures are markedly above October's consensus of 8.4 percent and 8.3 percent, respectively.
The wholesale price index, India's main inflation gauge, is expected to rise by an average 8.8 percent for the fiscal year ending March 2011 before declining to 6.4 percent in the following year. This is considerably higher than 8.3 and 5.7 percent forecast in the October survey. Tapping on strong demand for resources, particularly from China, Australia will see its two-decade long economic expansion hit a speed bump this quarter as floods in Queensland curb coal exports and consumer demand.
Tech heavyweight South Korea will sustain its solid economic growth this year after expanding at its fastest pace in eight years in 2010, which may stoke consumer inflation already building from soaring food prices, the Reuters poll showed. Asia's fourth-largest economy is forecast to grow 4.3 percent in 2011, according to a median forecast of 15 analysts, unchanged from the earlier survey published on October 14 and slightly below the Bank of Korea's prediction in December of 4.5 percent.