KUALA LUMPUR, June 20 (Bernama) — Asean’s economic growth in the second half of this year will continue at a fairly healthy level, despite the volatility arising from Japan’s quantitative easing (QE).

Oxford Business Group’s Regional Editor (Asia) Paulius Kuncinas in expressing this view, also said growth was not going to be much of an issue, as there was a lot of momentum among all the countries in Asean.

“We still have quite a lot of domestic consumption, exports are reasonably strong, maybe not so strong as they should be, but growing, rather than declining, and investment is also moving up.

“So, factors such as Japan’s QE is not enough to slow down the actual growth momentum,” he told Bernama on the sidelines of the CIMB Annual Asia Pacific Conference here, today.

Paulius said domestic demand was going to be one of the marginal factors driving Asia’s economic growth in the second half of this year.

“A part of the wide theme of rebalancing the Asian economy as a whole, is ‘consuming more and investing less’.

“In every single country that we cover, consumptions, credits and loans are going up, so, there is a pick up in domestic demand,” he added.

However, he said there may be a slowdown in investments if volatility persists. This is because it would have a very negative impact on investments and further down the road, could bring about inflation, which could be bad for consumption.

“But, it will be between 12 to 18 months, before we see inflation driven by the QE in Japan,” he added.

The QE in Japan has been affecting all the Asean countries since the policy started in November last year.

On Malaysia, Paulius said the effects would be felt through the equity market, which has been fluctuating, as volatility increased.

“While the US Federal Reserve remained the main catalyst (for the Malaysian stock market’s movement), Japan has been added to the general sense of uncertainty.

“We also see in the currency trade that investors have been far more jittery, and uncertain about the outlook for the ringgit. Monetary policy in the region is also causing more volatility,” he added.

On the worst case scenario for Asean’s economic growth, Paulius said it would be a sudden outflow of funding and a sharp drop in currency volatility.

“A big correction for currencies, unexpected inflation and a decline on the stock markets, would definitely hurt investors sentiment, alongside that of consumers, resulting in a slowdown in consumption.

“Another big risk is, the US and Europe suddenly experiencing another weakness, which would definitely impact exports,” he added.

Paulius said, while very unlikely at the moment, a combination of these factors could definitely destabilise the region. – BERNAMA, Zarul Effendi Razali