- Q2 GDP data released over the past month or so did not show a repeat of the across-the-board rises in exports seen in previous quarters, but the external sector still proved an important prop to GDP in many places. Thailand’s economy unexpectedly grew last quarter, as an increase in goods exports more than made up for a slump in domestic demand. Strong external demand also went a long way in offsetting sharp falls in private consumption in Taiwan and Malaysia. However, this is unlikely to continue. Recent monthly trade data show that merchandise exports have started to level off. And with high virus cases and strict containment measures weighing heavily on domestic demand across large parts of the region, we have pencilled in large falls in GDP for Thailand, Indonesia and Vietnam this quarter. The poor outlook means monetary policy is likely to be loosened further. We think the Bank of Thailand will cut rates by 25bps in September. The central bank in the Philippines is also likely to loosen policy next month. While we don’t have cuts pencilled in elsewhere, there is a growing chance that other central banks will follow suit.
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