The Asia-Pacific region is feeling the effects of the US Federal Reserve’s monetary policy, with business leaders concerned about the end of the central bank’s monetary stimulus. The Fed’s announcement in mid-2013 that it intended to taper its quantitative easing programme sparked volatility in emerging markets and now that the reduction has begun, by $10bn to $75bn a month, many in Asia are concerned that the region will experience a significant capital outflow. In fact, talk of the eurozone crisis and the impact of deleveraging by European banks in Asia are a distant memory, with the US now often cited as the biggest concern when it comes to the global economy.
While there are signs that the developed world has turned a corner in its recovery from the global financial crisis, the World Bank in January 2014 warned in a report of the risks of tapering to emerging markets. Speculation about the tapering seemed to have caused more turmoil than the actual event, but in a worst-case scenario, where there is a rocky adjustment to the US’s tapering, the World Bank estimates that capital flows to developing countries could decline by between 50% and 80% for several months.
