Asia's economies have weathered the global downturn and will enter 2013 in comparatively good shape. Risk levels appear manageable, domestic policy settings remain highly accommodative, and the global outlook has begun to stabilize.

After a solid fourth quarter of 2012, [Offshore Company Incorporation]most economies expect a steady upturn as export manufacturing accelerates. Corporates are in good shape and credit markets are functioning well. Yet GDP growth will not reach potential rates until the second half of the year, leaving full-year 2013 growth slightly below trend.

Policy settings are generally favorable. Monetary policy is accommodative, there is no sign of fiscal drag. Perhaps most important, governments around the region are stable, with business-friendly policies in place, especially in Southeast Asia. Improving infrastructure and steady reform in these economies will drive an upturn in foreign and domestic investment in 2013.

Neutral territory

Central banks will shift into neutral territory around midyear as growth recovers; some banks will start to unwind ultra-accommodative policies later in the second half.

As they were in 2012, risks to the outlook are elevated, weighted to the downside, and largely based outside of Asia. Europe's problems in particular continue to cloud the outlook. The US fiscal cliff looms as the new year opens, but it should be resolved soon enough, hopefully in a stable and long-lasting fashion.

China is the largest economy in the region and the biggest trading partner for most Asian economies, providing the major market for capital machinery from South Korea and Japan, hard commodities from Australia and Indonesia, and electronic components and circuits from Taiwan and Singapore.

As China goes, so goes the rest of Asia. China's economic forecast broadly mirrors that of Asia in 2013, with a steady improvement in demand beginning the fourth quarter of 2012 and running through the first half of 2013, helped by a stable external environment.

Chinese GDP may top 8 percent annual growth by midyear, partly due to a weak 2012 base, but it will finish 2013 below that benchmark, which now marks China's trend growth rate. China will lift the rest of the region toward trend rates of growth. Taiwan and South Korea, big exporters closely tied to China, will be expanding at potential by the end of 2013.

China's new leaders will continue on the path set by their recent predecessors. Headline GDP growth will be lower but more balanced and the government will put greater emphasis on combating corruption and protecting the environment. The shift toward consumer demand, a longtime government goal, will continue at a slow pace.

India's recovery

India should also enjoy a better 2013, though for different reasons. Policy missteps and political paralysis crushed business confidence and investment through 2012, though this has lately begun to improve, with a new finance minister, the withdrawal of an obstinate coalition partner and a flurry of pro-business reforms designed to lift the economy from its funk.[HongKong Richful  - Hong Kong Company Formation, Offshore Company Incorporation]

These moves are working. Near-term risks around the country's fiscal and external deficits have receded. Business groups are more upbeat and this will translate into better investment and GDP growth, but not until well into 2013. The moves help to lock in our longer-term outlook.

Looser monetary settings will provide some support to India's growth in the first half, but stubbornly high inflation and a large fiscal deficit limit the scope for further fiscal and monetary easing.

Signs from Japan are worrying. The government announced several modest stimulus packages in recent months targeted at small businesses, but this has not prevented the economy from entering recession for the fifth time in 15 years. Aside from reconstruction work on areas damaged by the 2011 earthquake and tsunami, the Japanese economy is weak. Export manufacturers have been hit by the downturn in domestic and global demand and, over several years, by rising Chinese and Korean competition.

Losing edge

Japanese firms cannot compete on price and have all but lost their technology edge. Rising tensions with China over disputed islands will have a minor macroeconomic impact, with tourism feeling the most pain. Yet cross-border tension could hurt confidence, trade and foreign investment - all things Japan needs more of.

That said, there is some upside to the outlook if, as expected, elections this month install the opposition LDP into power. Party leader Shinzo Abe has promised several reforms to kick-start the economy. Usually such an announcement doesn't merit much attention; Japan has churned through seven prime ministers in seven years, all of whom have promised to boost the economy.[HK Corporate Registration]

This time, however, the specifics are interesting. Bidding for a second term in office, Abe intends to bring the Bank of Japan partly under government control and compel it to engage in unlimited quantitative easing until inflation starts to rise and real interest rates turn negative. This is exactly what the economy needs. If implemented, it would provide upside support to our Japan outlook, with knock-on effects for Asia.