Consumer confidence keeps economy on course
Annual GDP growth was 6.1% in Q4 2012, little-changed from 6.2% in Q3. Trade volumes picked up in line with the rest of East Asia, and we expect GDP growth of 6.1% in 2013, similar to last year.
Consumer spending has solid momentum, rising 5.4% on the year in Q4, while import volumes rose by 6.8% on the same basis. Consumer confidence was high in January, and we expect spending to remain buoyant.
In January, exports were lower than a year earlier. But they have since improved markedly, helped by stronger demand from the rest of Asia. Demand in Europe, though still very subdued, has also picked up in recent months.
Inflation rose to a 22-month high of 5.9% in March. Despite expectations that this year’s harvest will be a good one, and will ease the pressure on food prices, broader inflationary concerns are likely to build as the economy picks up momentum. Having left rates on hold at its latest meeting in March, we expect the central bank to start raising interest rates in Q3 2013. And with commodity prices not expected to surge, the current account is likely to stay in deficit.
We expect the economy to grow by 6.0% in 2014, with strong domestic fundamentals supporting medium-term growth above 5.5%.
Source: Oxford Economics.
Bank lending growth
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