"Asia particularly depends on the global manufacturing sector economies like [South] Korea, Japan, Taiwan — all of them are very much exposed to global manufacturing demand. So that slowing immediately is going to transmit into slower growth in Asia," Neumann said.The weak global manufacturing outlook is further complicated by soaring inflation across the region, according to the economist.
"We also have the inflation problem. That's going to be a sticky one… and we think that will last with us well into year, despite the slowdown in manufacturing," said Neumann. Commodity prices have started to"come off the boil," which could put a damper on headline inflation, he said. However, underlying core inflation remains high — partly driven by wages and supply chain disruptions, he noted.
This will likely hurt Asia's exporters as core inflation will likely add to price pressures, Neumann added. "Make no mistake, we are looking at very sticky core inflation," Neumann said."And of course, supply chain disruptions in Asia are not helping on this front in terms of bringing down price pressures in the coming months."
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