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Concerns about inflation in Korea are rising, just as those about financial stability risks are starting to recede. Despite the worsening growth outlook caused by the surge in energy prices and war in Ukraine, we expect the Bank of Korea (BoK) to continue …
14th March 2022
Higher energy prices will hurt consumption We are cutting our GDP growth forecasts for many parts of emerging Asia in response to the surge in global energy prices and the war in Ukraine. Movements in energy prices have no direct impact on real GDP. But …
11th March 2022
Yoon Suk-yeol’s victory in yesterday’s presidential election should lead to a shift away from the bigger and more active state that began under President Moon. But the lack of a parliamentary majority means he will struggle to pass large parts of his …
10th March 2022
The State Bank of Pakistan (SBP) today left interest rates on hold at 9.75%, but the surge in oil prices mean it is likely to resume its tightening cycle soon. The consensus ahead of today’s meeting was split. Of the 46 analysts polled by Bloomberg, 21 …
8th March 2022
Bank of Thailand in a tricky spot Inflation has become a major policy headache for the Bank of Thailand (BoT) after figures released today showed that the headline rate surged from 3.2% y/y in January to 5.3% in February, the highest rate since 2008. (See …
4th March 2022
With inflation surging, the currency coming under downward pressure and the country on the verge of a sovereign default, today’s 100bp rate hike in Sri Lanka won’t be the last in the current cycle. We have long said that the Central Bank of Sri Lanka …
Korea’s presidential election on 9 th March will have major implications for the country’s economic future. A pledge by the ruling DPK’s candidate to introduce a universal basic income could bring some important benefits. However, ensuring that it is both …
3rd March 2022
Bank Negara Malaysia (BNM) today left its main policy rate on hold and the dovish tone of its statement supports our non-consensus view that rates will remain on hold throughout 2022. We think the market and consensus are wrong to expect hikes this year. …
Strong industry looks set to offset some of the Omicron hit February Manufacturing PMIs and Korean trade data show that regional industry had another strong month. This should offset some of the Omicron-related weakness in service sectors this quarter. …
1st March 2022
The recent jump in oil prices poses a significant upside risk to our inflation and interest rate forecasts for this year. Central banks would normally “look through” a one-off jump in the price level and try and cushion the blow to real incomes by keeping …
28th February 2022
Virus cases reach record levels Most of the focus of the past week has been on events in Ukraine. You can follow our coverage of the crisis here . Having fallen sharply on the day of Russia’s full-scale invasion, financial markets across the region …
25th February 2022
A large upwards revision to the Bank of Korea’s (BoK) inflation forecast as it left rates on hold today signals that more tightening is just around the corner. We still expect three more 25bp hikes in 2022, taking the policy rate to 2.00%. Today’s …
24th February 2022
Taiwan new export orders picked up for a third straight month in January. While we expect this trend to go into reverse soon, a large backlog of unmet orders will keep the region’s exporters busy throughout most of this year. Taiwan’s export orders …
21st February 2022
After a strong rebound in Q4, the pace of Thailand’s economic recovery over the coming year will largely depend on how quickly tourists return. While we expect a sustained recovery in the tourism sector to get underway this year, arrivals will still be …
The centrepiece of Singapore’s budget today was confirmation that the Goods and Service Tax will rise next year and again in 2024. The hike is intended to help pay for an increase in healthcare spending as the population ages over coming years. The …
18th February 2022
Ukraine crisis adds to inflation risks The main channel through which the Ukraine-Russia crisis could affect Asia is higher oil prices. Our current inflation forecasts assume that the price of a barrel of Brent crude will drop back to US$70 by the end of …
The central bank in the Philippines (BSP) left its main policy rate unchanged at 2.0% today and we expect rates to be left on hold throughout 2022. In contrast, the consensus is expecting 50bps of hikes. Today’s decision came as no surprise and was …
17th February 2022
Omicron is likely to prove only a small stumbling block on the road to recovery after the strong growth of late 2021. We still expect GDP to return to its pre-pandemic trend later this year. The second estimate of Q4 GDP shows that output grew at a rapid …
Singapore budget to focus on revenue raising The focus of Singapore’s 2022 budget next Friday will be on steps to raise revenues to help deal with a rapidly ageing population. The government is set to confirm a delayed hike in the Goods and Services Tax …
11th February 2022
Recovery to continue after strong Q4, but policy rate hikes still unlikely Malaysia’s economy rebounded strongly last quarter and, despite headwinds from Omicron, should continue to recover throughout 2022. The 6.6% q/q expansion in Q4 more than reversed …
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and the weakness of inflation means the tightening cycle is likely to be very gradual. The decision to leave rates on hold came as little surprise and was predicted by all 31 …
10th February 2022
The Bank of Thailand (BoT) left its policy rate unchanged today at 0.5%, and despite the recent rebound in inflation, we expect interest rates will remain on hold for some time to come. The decision was unanimous, and the outcome was correctly predicted …
9th February 2022
Inflation is a growing concern for policymakers in South Asia and means interest rates are likely to rise further this year. Elsewhere in Asia, inflation remains low and is likely to fall back over the coming months, supporting our view that policymakers …
8th February 2022
Indonesia’s economy rebounded strongly in the final quarter of last year, but the recovery is now entering a more difficult phase. Omicron will act as a small obstacle in the first quarter. But a bigger drag will come from falling commodity prices and …
7th February 2022
Omicron impact likely to be mild The Philippines has been hit harder than any other country in the region by the pandemic, but the past week has at least brought some good news. The country was the first in Asia to bit hit by an Omicron wave. But daily …
4th February 2022
Industry will be kept busy by order backlogs January Manufacturing PMIs suggest that regional industry remains in rude health after a very strong end to last year. While there are signs that producers are having some success in tackling large backlogs of …
3rd February 2022
Korea learning to live with COVID-19 A successful vaccination campaign means that, despite a surge in COVID cases, Korea is sticking with its plans to reopen the economy. Chart 1: Daily New Cases of COVID-19 in Korea Source: JHU Korea recorded a record …
28th January 2022
The Omicron variant is spreading quickly across Asia. Daily virus numbers are now at record levels in Korea, Singapore and the Philippines. However, the economic impact of Omicron is shaping up to be much smaller than previous virus waves. Restrictions, …
27th January 2022
GDP growth in Taiwan rebounded last quarter on the back of a recovery in consumer spending, and we estimate the economy ended the year around 4% above its pre-virus trend. Growth is set to slow over the coming quarters on the back of weaker exports, while …
Fast growth won’t persuade central bank to start tightening While an Omicron wave means the economy’s continued strong performance in Q4 is unlikely to be repeated this quarter, we think growth will pick up again before long. That said, the overall …
Overview – Omicron should prove no more than a small stumbling block for Asia. Our forecasts are for above-trend and above-consensus growth in most countries this year. India, Indonesia and Korea are likely to raise interest rates in 2022, but with …
25th January 2022
The Monetary Authority of Singapore’s (MAS) surprise move to tighten policy today, ahead of its usual April meeting, probably won’t be its last. We think the added uplift to inflation from a domestic outbreak of Omicron will force the MAS to tighten again …
While Omicron means that the strong GDP growth recorded in Q4 2021 is unlikely to be repeated this quarter, the recovery should be back on track before long. With the economic outlook still upbeat, the Bank of Korea is set to continue tightening over the …
The State Bank of Pakistan (SBP) left interest rates on hold today at 9.75% and indicated that further modest tightening is likely later in the year. We think the central bank will take a breather over the next few months, but we doubt today’s meeting …
24th January 2022
Thai tourism to support the baht Better times lie head for Thailand’s tourism industry after the government this week announced it would resume its quarantine-free travel scheme from 1 st February. The scheme was suspended late last year due to fears …
21st January 2022
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, but the decision to raise the reserve requirement ratio (RRR) from March suggests that rate hikes will come sooner than we had previously expected. The decision to leave rates …
20th January 2022
The dovish tone of Bank Negara Malaysia (BNM) as it left rates on hold today only strengthens our non-consensus view that policy will be left on hold this year to support the recovery. In contrast, the analyst consensus is for 50bps of tightening, while …
The 50bp rate hike made by the Central Bank of Sri Lanka (CBSL) today – after it stood pat for two meetings as foreign currency dried up and inflation soared – is likely to prove too little too late. The CBSL today raised its deposit and lending rates by …
Employment back above pre-crisis levels At face value, the Korean labour market figures for December (published earlier this week) paint an encouraging picture, with total employment rising to a record high. (See Chart 1.) Chart 1: Korea Total Employment …
14th January 2022
The Bank of Korea (BoK) is far from done, after making its first back-to-back rate hike since 2007 today. We now expect a total of four 25bp hikes in 2022, taking the policy rate to 2.00%. Today’s decision to raise the policy rate from 1.00% to 1.25%, …
Asia will be – contrary to consensus expectations for widespread hikes – the only EM region in which the median central bank isn’t tightening this year. 2021 was a year of hits and misses in terms of our forecasts . We correctly forecast that most central …
10th January 2022
Korea, the Philippines and India are each holding elections this year that will play a role in setting fiscal and structural reform priorities, including the possible introduction of a universal basic income in Korea. And China looks set to tear up the …
Philippines won’t start tightening this year Falling inflation and an increasingly uncertain economic outlook add weight to our non-consensus view that the central bank in the Philippines (BSP) will not start tightening in 2022. Figures released earlier …
7th January 2022
Manufacturing PMIs and timely trade data reveal that Asia’s export-focussed industry gained momentum at the turn of the year. While the Omicron variant presents a key threat to the outlook, it is unlikely to cause nearly as much disruption to industry as …
4th January 2022
Most countries in Emerging Asia have now recorded cases of Omicron, and the experience from elsewhere in the world suggests that it is only a matter of time before there is widespread community transmission of the new variant. Many places have already …
22nd December 2021
The Bank of Thailand (BoT) left interest rates on hold today at 0.5% and hinted in its statement that it was in little rush to tighten monetary policy. The setback to the tourism sector caused by the spread of Omicron means rates are likely to remain at …
Fed rate hikes pose little threat to Asia With the start of US monetary tightening drawing near, questions have been asked about whether Asia’s central banks will respond with tightening of their own. Hong Kong and Singapore will: their exchange rate …
17th December 2021
Taiwan’s central bank (CBC) today left interest rates unchanged at 1.125% and despite rising inflation, surging property prices and the strong economy, we don’t think policymakers will be in any rush to tighten policy. Today’s decision was unanimous and …
16th December 2021
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and despite the prospect of the US Fed raising interest rates soon, we don’t think BI will be in any rush to tighten. The decision to leave rates unchanged came as no surprise …
The central bank in the Philippines (BSP) today left interest rates unchanged at 2.00%, and with inflation set to ease further over the coming months we think the central bank will keep monetary policy loose for the foreseeable future. Today’s decision …
