Ukraine adds to inflation risks, SE Asia reopening

The recent rise in oil prices poses a key upside risk to our inflation forecasts. We already expect rate hikes this year in Korea, India and Indonesia. We think Taiwan, where price pressures have risen steadily over the past year and GDP is above its pre-pandemic trend, would also raise interest rates if oil prices were to rise further and remain high for a long period. Central banks in South East Asia, where inflation is generally less of a worry and recoveries less advanced, would be more likely to “look through” a rise in oil prices. Meanwhile, although tourism across South East Asia has been very slow to recover from the pandemic, prospects are finally improving after a number of countries recently announced plans to speed up reopening of their borders. The improved outlook for tourism should help drive a decent recovery across South East Asia this year, and our growth forecasts for the region are mostly above consensus.