Regional growth is forecast to stabilise around 4% over H2 2024 and through 2025-26. While this is little changed from current levels, it is reflective of normalising growth in emerging markets and recovery in advanced economies.
At approximately 50% of regional GDP, forecast sub-trend growth in the Chinese mainland will act as a headwind to stronger regional growth. As issues around the residential real estate market and domestic consumption are resolved this should provide some upside risk to both local and regional economic growth.
Many central banks will pivot as inflation returns to target levels, though the pace and magnitude of cuts will vary reflecting the pace of decline in “last mile inflation”, foreign exchange implications and local wage price pressures. Expect the Bank of Korea, as one of the first banks to raise rates globally, to be amongst the first to cut in the region. In contrast the Bank of Japan, having recently moved from its negative interest rate policy, needs to manage the weak yen versus weak domestic consumption.
Labour markets are forecast to soften marginally over the remainder of the year, before stabilising into 2025. However, this modest rise in unemployment is more reflective of growing labour forces rather than a contraction in employment levels.
