KUALA LUMPUR: While Asia’s overall economic growth picture is likely to be mixed this year, inflation is not likely to dent the continent’s prospects, according to Manulife Investment Management (Manulife IM).

       Senior global macro strategist Sue Trinh said economies in the region have a long way to go to recoup output lost due to disruptions brought about by the pandemic.

       “In our view, the biggest concern remains weak consumer demand, which will be exposed by the looming downturn in export growth. But Asia is better positioned to manage rising price pressure. Broadly speaking, Asia’s milder inflation outlook comes down to one simple factor – trade surpluses,” she said in a research note yesterday.

       Trinh said economies in the region were able to maximise export production through much of the past two years.

       “At the same time, the surge in pent-up demand in Asia after the reopening was not as strong relative to other regions, particularly when compared with other emerging market (EM) economies,” she said.

       She noted that another set of data, namely long-distance freight rates, also supports Manulife IM’s view that inflationary pressure in Asia is likely to be more tamed.

       “The rise in intra-Asia shipping costs has been much more muted in comparison with other regions, thanks to excess manufacturing supply and relatively weaker consumer spending. An important takeaway here is what this means in regard to monetary policy. For the region as a whole, we expect to see policy normalisation take place at a much slower pace and at a lower magnitude relative to previous cycles and other EM economies,” she said.

       Malaysia and Singapore may be starting the year at below-trend gross domestic product, but have a strong potential to recoup lost output. “In Malaysia, an accelerated vaccination rate and higher government spending ahead of the upcoming election, widely expected to take place in the second half of the year, should support domestic demand,” she explained. — Bernama