India , the new land of economic promises.
India is the first choice, not only in Asia or among the emerging markets, but throughout the world, because is carrying out radical reforms that improve the economic fabric, slowdown in inflation and improvement of the country’s credit ratings which will bring positive effects both on the bonds (whose yields are expected to decline) and on the stock market. It’s ‘the Donald Amstad conviction, Aberdeen specialist for the Asian market. An opinion that comes in the days when the World Bank draws a weak scenario for the East of the world, with China’s economic slowing down that impact on the outlook of the area. The international organization has left unchanged its growth forecast for Beijing compared to the October forecast, but has limited the outlook for the emerging economies of East Asia and Pacific, which will grow on average by 6.3% in 2016 and 6.2% in 2017 and 2018, down from the 6.5% growth achieved last year.
For the World Bank, it is still a region that will continue to be decisive for the world balance, when you consider that last year the economies of the Asia-Pacific quadrant have counted two-fifths of global growth. Reduced expectations it is given because of the overall economic condition and the difficulties in implementing structural reforms by these economies, according to Victoria Kwakwa, incoming vice president for East Asia and Pacific area. Among the most flourishing situations are those of Vietnam and Philippines, with both estimated growth above 6%, while Indonesia is for this year slightly above 5%. Still difficult situation for the economies of Laos, Papua New Guinea and Mongolia, which will be affected by the low commodity prices and the slow down of external demand.
Regarding to India, after the Central bank decided to cut interest rates to 6.5% in recent days, Amstad stresses in an e-mail interview that “inflation has fallen significantly, thanks to the dynamic global commodity prices. The central governor Raghuram Rajan has been able to give credibility at monetary policy and the rate cut shows that the price decline is interpreted as structural. ” Even in front of the fact that recently the financial conditions were difficult, the expert points out that “the good news is that the central bank, the government and the institutions of credit have in mind a banking system reform,” which will improve the transmission of monetary policy to the real economy. Essentially, confidence to Prime Minister Modi: “It’s changing the dynamics of government institutions and policies, and even if we think in terms of 3-5 years the outlook is positive”.
Refering to China, about which new concerns have emerged by the IMF, Amstad explains that by the organization of Washington and the central banks has grown the awareness of the importance of the Beijing choices: “For example, the Fed includes Chinese policies as a foreign key risk in steering its monetary policy decisions. ” Even in Beijing the need for coordination with the rest of the G20 has grown, and these are important aspects. “But we must not overestimate the challenges facing the Chinese economy: there is excess capacity in some sectors, investments that do not offer adequate returns for a wrong choice. But it is not just near a financial crisis, for the ‘wide availability of liquidity in the system “. And to avoid the recent market changes? A crucial aspect is “the reform of state enterprises” and their relationship with the flow of financement.