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Asean Affairs  17 November 2010

Asian economic uncertainties

By  David Swartzentruber
AseanAffairs     17 November 2010

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There still is an air of uncertainty floating around Asia amid several economic uncertainties.

The main uncertainty has been the rise in Asian inflation that may be expected to hit every Asian economy during the coming year. Core inflation will increase 2 to 3 points above this year’s low level.

The effect of the U.S. Federal Reserve’s pumping US$600 billion into the economy should impact Asian economies until the middle of 2011 with capital inflows continuing to appreciate currencies. For example, the Thai baht is expected to rise to 28 to the U.S. dollar by the end of next year.

Although real estate prices are rising, there does not appear to be any sign of a “bubble,” which was the cause of the 1997 Asian financial crisis.

Currencies are expected to strengthen and interest rates are expected to increase gradually along with rises in asset prices and commodities, especially stocks, property and crude oil. Business operators will face higher costs both in finance and operations.

The high export rates of the past 11 months are not likely to repeat themselves in 2011 and exports will decline a few points below this year’s high levels. This is due to the still sluggish economies in the developed economies both in the United States and Europe.

As U.S. President Obama recently said it would be wrong for Asian countries to expect to raise their economies on continued high exports to the United States.

Paul A. Ebeling, Jnr

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