HONG KONG: According to Morgan Stanley, GDP growth in the region is expected to remain stable at 6.5% in 2015, vs 6.5% in 2014.
While the growth recovery in developed markets should lend some support to external demand for the region, this improvement will likely be offset by continued deceleration in growth in China and sluggish domestic demand amid the challenges from weakening demographics, elevated debt, and intensification of deflationary pressures.
The weaker incoming activity data in terms of growth deceleration in retail sales, capex-related activities, and non-commodity exports over the past three months suggest the region’s growth momentum may have slipped further in 1Q15 due to sluggish domestic and external demand.
While we do expect a slight pickup in growth in the quarters ahead, the growth recovery is unlikely to be vigorous, in our view, given the slow domestic demand growth outlook and only a slight pickup in external demand.
