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Asia teetering on the edge?

Jaimie Kanwar

Inflation is ravaging many Asian economies, but does this mean recession is inevitable?

Apparently not, according to Haruhiko Kuroda, Head of the Asian Development Bank, who recently stated that ‘growth in Asian economies may slow this year, but a recession is unlikely'.

He added: "The region's biggest concern is inflation, even though many countries, such as Taiwan and Vietnam, have raised interest rates this year.

"I'm reasonably confident that nothing like the Asian currency crisis 10 years ago would happen in the region, simply because many emerging economies in Asia have accumulated a large amount of foreign exchange reserves".

US interest rates currently stand at 2.0% while rates in India, for example, stand at 8.5%. This means investors might consider using US dollars to buy rupees to take advantage of better returns.

Asian currencies such as the Korean won and the Indian rupee have been falling in recent weeks amid concern that their central banks have not been doing enough to combat inflation.

Indian inflation has hit a record high of 11.63% while Vietnam's inflation stood at 26.8% in June. Inflation in the Philippines is currently at a 14-year high of 11.4%.