16-Sep-2010 11:51 AM
Deloitte releases economic outlook for Australia, China, India and South Korea
- Australia: A better-than-expected recovery in global demand facilitated strong growth in the Australian economy in 1H2010 and although commodity prices have declined, Australia’s terms of trade will likely remain high over the next year. Public investment is set to decline as various stimulus projects are completed, but a likely increase in private investment and Asia’s demand for resources provide a positive outlook. The central bank forecasts the economy to grow by 3.25% during 2010 and 3.75% in 2011. However, uncertainty around the recovery in developed countries and moderation in China’s growth may adversely affect exports and prompt a downward revision of these estimates. The central bank has not altered interest rates since May, maintaining it at 4.5% and, since inflation is expected to hover between 2% to 3% over the next year, further monetary tightening is unlikely.
- China: China appears to be achieving its goal of slowing the economy and heading off inflation. Monetary tightening (higher reserve requirements and restrictions on bank lending) has already led to a decline in the growth of the money supply and bank lending. Going forward, policy will probably be on hold until clearer signs emerge. As a result, GDP growth in 2011 could be in the range of 8% to 10%.
- India: India’s economy, which rose 8.8% in the Jun-2010 quarter, is likely to grow by more than 8% over the next three quarters. Although Indian exports have recovered beginning in late 2009, the sector is expected to see sluggish growth in the coming months. Imports rose 34.4% in Jul-2010, indicating strong domestic industrial demand. Overall, the government’s target of over 8.5% annual growth seems very achievable.
- South Korea: The South Korean economy bounced back strongly from the economic downturn, thanks in part to low interest rates, robust exports and government stimulus spending. But the country will likely experience a moderation in GDP growth during the second half of 2010 through 2011. Heavy dependence on exports makes South Korea vulnerable to volatility in the global economy, especially China, the US and the EU. Further, a strengthening currency poses risks to South Korea’s export competitiveness. Although inflation and the fiscal deficit remain subdued, the economy may face challenges due to rising commodity prices and waning stimulus expenditures. GDP growth may exceed 6% in 2010 and moderate to 4% to 4.5% in 2011. Meanwhile, the Bank of Korea has increased interest rates, signaling confidence in the economic recovery. [more]