Inflation in Asia to fall, then rise

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Although inflation in Asia will rapidly decline within the next six months, prices will pick up speed again by year-end, according to Michael Spencer, Chief Economist for Asia at Deutsche Bank.

With crude oil prices moving sideways and food prices tumbling, worries may switch to global deflation from sky-rocketing prices. However, Spencer’s forecast claims the exact opposite, that inflation will be seen by the end of 2012, said a Business Times report.

Deutsche Bank predicts Europe’s economy to shed 0.5 percent over a shallow three quarters-long recession this year. From Asia’s perspective, concerns must be muted as Greece and Portugal are tiny economies that form about five percent of euroland.

“Investors are so worried that peripheral problems will affect the rest of Europe that it is colouring how people see the outlook for Asia,” Spencer added.

However, this will likely change before the middle of the year when the unlikely risks weaken and investors stop panicking.

Spencer also expects China to face a similar scenario of slow growth in the first half and an improvement in the second half.

“An earlier and slightly more vigorous policy response”, he noted, should ease falling property prices.

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