By Sumanta Dey
BANGALORE (Reuters) - Asian economies will likely register another year of weak growth in 2013, despite pockets of mild recovery expected in some countries as central banks continue to keep policy accommodative, a Reuters poll showed.
But much will hinge on whether China, Asia's largest economy, can pull out of its downtrend this year, if the U.S. economy can continue to gain traction and if the euro zone can contain its prolonged debt crisis.
Forecasts for nearly all of the 12 economies polled in October were downgraded from the last quarterly poll conducted in July.
"Next year will probably be quite a difficult year for most Asian economies," said Vishnu Varthan, economist at Mizuho Corporate Bank.
"A lot of these economies still have their umbilical cords tied to China and whether China eases policy and its magnitude will probably decide the course of growth in the region."
After starting off 2012 in relatively good shape compared to their Western peers, one Asian economy after another began quickly succumbing to the global downdraft as the year progressed and demand for the region's exports deteriorated in the United States, Europe and then China.
China is scheduled to publish third-quarter GDP data next week, with investors anticipating a seventh straight quarter of slowing growth, and economists were reluctant to make fresh forecasts so close to the release date as they run the risk of having to immediately revise their assumptions.
The last Reuters poll of economists four weeks ago was taken in the wake of weaker-than-expected data for August and revealed a sharp cut to their third-quarter growth call to 7.4 percent year-on-year from a 7.9 percent consensus forecast just two months earlier.
Investors have repeatedly pushed back their expectations of when China's economy would hit the bottom of the current growth cycle. The consensus view at the start of 2012 was that the first quarter would be the nadir. It has since moved to the third quarter, with the economy set for its slowest full year of growth since 1999.
Reuters polls also showed that Asia's second-largest economy, Japan, is stumbling and likely shrank in the third quarter as the slowdown in China and the euro zone's woes take a bigger toll on the export-reliant nation than previously anticipated.
The economy is expected to grow just 0.1 percent in the fourth quarter after a predicted 0.1 percent contraction in the third quarter, the poll of 26 economists taken October 2-9 showed.
For the full year to March 2013, the economy is expected to grow 1.7 percent, revised down from a 1.8 percent expansion projected last month, and the lowest estimate since the first forecast in February 2011.
The poll also saw a slightly lowered growth forecast for the next fiscal year to 1.4 percent from a 1.5 percent expansion in the previous survey.
Graphic for the poll: http://link.reuters.com/vub59s
WORST OVER FOR INDIA?
But economists said the worst may be over for India's economy, with one big proviso: the federal government must continue to push through and stick to politically unpopular reforms.
The Reuters poll showed India's growth slump has likely passed and the economy will gradually recover over the next year, though the rate of expansion for this fiscal year will still be the weakest in a decade.
GDP in Asia's third-largest economy will likely grow 6.6 percent in the fiscal year to March 2014, after expected 5.7 percent growth in this fiscal year. That compared to 6.3 percent and 7.0 percent growth predicted in the last poll in July.
Optimism has risen since New Delhi announced a slew of reforms last month to mend the government's finances, but economists warned that failure to stick to the path of reforms will likely throw the country back into a period of low growth.
Hopes for a turnaround beginning in the fourth quarter have been influenced by several factors.
Optimism in world financial markets has shown some improvement after the U.S. Federal Reserve and the European Central Bank agreed to launch new rounds of bond buying to help boost their fragile economies and reignite global growth.
"Tail risks to global growth has been substantially mitigated by the decisive action of the ECB and Fed," said Wai Ho Leong, economist at Barclays.
Attention has also focused on more encouraging though still erratic economic data from the United States, although nothing so far is pointing to anything more than a sluggish recovery.
The U.S. is now expected to grow at less than 2 percent over the remaining months of the year, while the euro zone will likely find itself mired in recession for some time.
That is unlikely to bode well for Asia's export-driven economies such as Singapore, Taiwan and South Korea, all of which have slashed growth forecasts for both this year and next.
POCKETS OF RECOVERY
Australia and New Zealand, two of Asia's largest commodity driven economies, are expected to grow at a slightly faster pace this year.
"There will still be quite a bit of tiering within Asian economies. Depending on where commodity prices are going that will impact how Australia, the Philippines (and others) grow," said Varthan.
With growth in focus and inflation expected to remain relatively subdued, most central banks in the region are expected to keep policy accommodative into 2013.
The poll showed most central banks will likely keep interest rates on hold in coming months, though India's central bank is expected to cut its benchmark repo rate by 25 basis points by December.
South Korea's central bank cut rates on Thursday for the second time in four months, as expected, while Indonesia kept rates unchanged at a record low while conceding that domestic demand, while still robust, was not as high as expected as the global downturn drags on.
(Additional reporting by Deepti Govind, Rahul Karunakar, Wayne Cole in SYDNEY and Kaori Kaneko in TOKYO; Graphics by Chrisine Chan; Editing by Kim Coghill)