The Viewpoint: Asia amid higher US rates – A comparison with past cycles

As US rates remain elevated, investors are asking about the implications for Asia. This report compares Asia's macro situation during past episodes of elevated rates in the US. We believe this cycle is different and that Asia as a region is better positioned than previous cycles. While the US cycle resembles the 1990s (technology-led capex), what is different is the US fiscal situation, with wider deficits and public debt at 124% of GDP versus 108% pre-Covid and a 63% average in the 1990s. For Asia, this cycle resembles the 2000s rather than the 1990s: growth is driven by capex, exports and productivity, while macro stability indicators remain in check. Asia's current account surplus has risen to US$1.6 trillion on a 4Q trailing basis (4.2% of GDP) and core inflation remains moderate. Even after expected rate hikes, real rates are not likely to be in restrictive territory, and private sector balance sheets are healthy in Asia ex China. On exposure, the Philippines, Indonesia and India