US reflation seen having mixed impact on Asean economies
Funding squeeze from Fed tightening won't be as bad as in 2013 but growth spillover won't be as good as in 2004.
Add BT as a preferred sourceTHE outcome of the US presidential election has led to market expectations of a reflationary fiscal stimulus. As a result, yields have risen as the market expects the Federal Reserve to undertake further normalisation.
Developments in the US will have implications on the 2017 outlook for Asean. Yet the combination of better US growth and Fed tightening had vastly different implications for Asean in 2004 and in 2013.
When the Fed raised rates in 2004 and continued to do so until 2006, the US economy was growing as households had levered up. The final demand provided by US consumers - together with the ascension of China to the World Trade Organization (WTO) and the production supply chain that it brought forth in Asia - enabled Asean economies to ride on the global export cycle, and current account surpluses in Asean mostly rose.
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