Raising our ambitions for business performance’, available at: https://howgoodisyourbusinessreally.co.uk/ Vlieghe, G (2016), ‘Debt, Demographics and the Distribution of Income: New challenges for monetary policy, Speech given at the London School of Economics, available here: http://www.bankofengland.co.uk/publications/Pages/speeches/2016/872.aspx World Economic Forum (2016), ‘The Global Competitiveness Report 2015-2016’, in particular Chapter 1.2 on ‘Drivers of Long-run prosperity’, available at: http://reports.weforum.org/global-competitiveness-report-2015-2016/  24  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  24
Even so, targeted fiscal and monetary stimulus measures should support growth at close to 7% this year. •  Against this backdrop, overall growth in Emerging Asia will remain firm, at 6% this year. Banks in Emerging Asia will therefore not do badly. There are, however, downside risks that they need to watch. First, the divergence in monetary policy settings among the G3 economies could pose risks to financial stability that could also potentially hurt growth. The anticipated normalisation of interest rates in the US against continuing quantitative easing in the Eurozone and Japan will be reflected in sharp movements in exchange rates and bond yields. This is not a prediction, it is already happening. The scenario of a “double whammy” posed by a rise in US interest rates and a strong US Dollar could expose vulnerabilities among some Asian borrowers. •  Rising interest rates will increase the debt servicing burden of Asian households and corporates, especially those who have taken on high levels of debt at low rates. •  Asian corporates with large unhedged dollar borrowings could face increasing stress as a strengthening dollar undermines their ability to repay loans. Banks in Emerging Asia could face higher non-performing loans. They could also face reduced US Dollar funding if there are large capital outflows from Asia. But their liquidity and capital positions are generally sound and they should be able to weather this. What matters is the medium to long term, and here the outlook for Asia remains sanguine.