Asia seeing growth acceleration but Singapore a "pocket of weakness"

Along with stumbling Korea and Australia.

Here's more from the latest Asia Economic Outlook from BBVA:

Asia’s growth momentum has been picking up, as expected, on the strength of accommodative domestic policies and a rebound in China. After bottoming out in Q3, growth in most of the region’s economies picked up in Q4 and recent high frequency indicators suggest the momentum is continuing into 2013. Labor markets remain tight, and domestic demand has been resilient, especially in the ASEAN economies. That said, the pickup has been quite modest and there remain pockets of weakness throughout the region, especially in some of the more open economies such as Singapore, Korea, and Australia.

Our growth forecasts continue to envisage a pickup for most economies in 2013-14 on continued policy support and an improving global environment. We expect growth for AsiaPacific of 5.6% in 2013 (up from 5.2% in 2012), rising to 5.8% in 2014, underpinned by robust growth of around 8.0% in China for both years. Our main upward revision is for Japan in 2013 (1.7% from 1.2% previously) on stimulus measures of the new government and the Bank of Japan. In contrast, we have lowered our projection for India (6.5% from 6.7% previously) on weaker momentum and tighter monetary policy than expected. 

Inflation has evolved as previously envisaged, and price pressures remain subdued. With the expected pickup in growth, inflation should rise gradually in 2013 but should remain manageable, providing room for policies to remain accommodative in most cases. However, capital inflows stemming from strong global liquidity and the region’s robust growth prospects could exert upward pressures and generate asset price bubbles in some economies. 

With inflationary pressures still at bay and the pickup in growth still modest, monetary policy continues to be on an easing bias in most countries. A number of central banks have eased policy in recent months, including Australia, India, Korea, Thailand, and Japan (quantitative easing). Looking ahead, we expect further easing in India, Korea, and Japan (through further expansion of the asset purchase program); and we would not rule out another rate cut in Australia if non-mining activity stays weak. Looking further ahead, rate hikes may be on the horizon in some ASEAN economies as overheating pressures mount (in this regard, Indonesia’s widening current account deficit has drawn attention). 

With growth momentum on the rise, fiscal policies in most economies are likely to be less expansionary than in 2012. Exceptions include Korea, where the new administration of President Guen-Hye Park has front-loaded 2013 spending and has left open the door to further spending stimulus. Japan is also an exception, where the new government of Prime Minister Shinzo Abe has implemented a fiscal stimulus package despite market concerns about Japan’s high public debt. Elsewhere in the region, policies remain geared to fiscal consolidation, especially in India where policy makers continue to grapple with a large deficit, and in Australia where the government is seeking to return the budget to surplus. 

Capital inflows and currency tensions will pose challenges to macro policy in 2013. We expect capital inflows to pick up due to global liquidity, reduced risk aversion, and the region’s strong growth prospects. This could put upward pressure on inflation and asset prices, posing a challenge to monetary policy. In addition, the recent weakening of the yen is generating tensions among trading partners, especially Korea, which could cause the authorities to resist appreciation pressures through intervention and macroprudential tools. 

Though risks to the downside remain sizeable in view of global uncertainties, they have become more balanced than in previous quarters. Tail risks in Europe have diminished following positive policy steps, but the growth outlook has not yet improved, and smooth policy implementation cannot yet be taken for granted. In the US, policymakers are still grappling with key elements of the fiscal strategy. Within the region, geopolitical tensions remain elevated between China and Japan, and events in North Korea pose a perennial risk. On the other hand, growth outturns could exceed expectations if the global economy picks up faster than expected and if China’s rebound surprises to the upside. Overheating risks may emerge in economies such as Indonesia and the Philippines before the end of 2013.