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Growth slowed in Q1 as Omicron held back the recovery at the start of the quarter. Activity is rebounding now that the economy has reopened, but other headwinds are growing. We estimate that the 5.0% y/y growth reported today for the first quarter is …
9th May 2022
Jump in inflation likely to be temporary Interest rates in the Philippines look set to rise soon, but the tightening cycle is likely be gradual. Figures published earlier this week show that headline inflation in the Philippines increased from 4.0% y/y in …
6th May 2022
Asia’s export-focussed industry softens further, more weakness ahead. Regional Manufacturing PMIs point to a further worsening of industry conditions, chiming with Korean trade data which suggest a major softening of external demand. Both reinforce the …
3rd May 2022
Central banks across the region have recently turned more hawkish. Over the past month or so, policymakers in Korea, Taiwan, Singapore, Sri Lanka, India and Pakistan have all tightened policy. Governor Benjamin Diokno in the Philippines has also hinted …
29th April 2022
Indonesia export ban may prove short lived Indonesia has caused turmoil in global commodity markets over the past week with its decision to ban exports of palm oil. The country is the biggest palm oil producer in the world, accounting for over 50% of …
Overview – Our GDP growth forecasts are generally above the consensus, but with higher commodity prices and weaker global demand set to weigh on economic recoveries, growth across much of Emerging Asia will be slower than we had anticipated in our last …
28th April 2022
A further pickup in exports drove continued strong Taiwanese GDP growth in Q1, but we expect the economy to lose momentum over the coming quarters as the external sector weakens and COVID-19 weighs on consumer spending. GDP grew by 1.56% q/q in the first …
A rebound is already underway following the economic hit from Omicron, which today’s provisional Q1 GDP figures show was relatively mild. But, after an initial pick up in Q2, we expect the recovery to slow as headwinds to growth mount. That should see the …
26th April 2022
Softer trade figures a sign of things to come There are growing signs that demand for the region’s exports are starting to soften, a trend we expect to continue over the coming months. Figures published on Wednesday show that Taiwanese export orders …
22nd April 2022
Bank Indonesia (BI) left its main policy rate unchanged at 3.5% at its meeting today, and the relatively benign outlook for inflation means the tightening cycle is likely to be very gradual. The decision to leave rates on hold came as little surprise …
19th April 2022
Pakistan – new government faces major challenges It has been a tumultuous week in South Asia. On Saturday, Imran Khan lost a vote of confidence and was replaced as prime minister on Monday by Shehbaz Sharif . The new PM faces a difficult balancing act as …
14th April 2022
Today’s decision by the Bank of Korea (BoK) to hike its policy rate by 25bp to 1.50% is unlikely to mark the end of its tightening cycle given the strength of inflationary pressures. We expect at least two more 25bp rate hikes in the coming quarters, …
The Monetary Authority of Singapore (MAS) tightened monetary policy again at its meeting today. With growth set to remain strong and core inflation likely to stay elevated, we expect the MAS to maintain its tight policy stance for at least the next couple …
We held a Drop-In on the political and economic problems facing Pakistan earlier today (see an on-demand recording here ). This Update answers some of the most common questions that we received. Question 1: What have we learned about the new prime …
13th April 2022
Sri Lanka’s decision today to suspend payments to bond holders is designed to pave the way for a deal with the IMF and an orderly rescheduling of its debts. The diverse array of creditors to Sri Lanka could make a debt restructuring programme difficult to …
12th April 2022
The main challenge facing Shehbaz Sharif, who today replaced Imran Khan as prime minister of Pakistan, is stabilising the economy. The key to achieving this is a deal with the IMF. The price for any further support will be a further tightening of fiscal …
11th April 2022
Prime Minister loses case in Supreme Court A change of leadership in Pakistan looks likely this weekend, calling the future of the country’s IMF deal into question. Yesterday, the Pakistani Supreme Court ruled unconstitutional the dissolution of the …
8th April 2022
So far, the spill overs from the COVID outbreak in China to the rest of Asia look to have been relatively minor. But the possibility of major disruption to supply chains remains a large and growing risk. The China Caixin Services PMI was released today …
6th April 2022
A constitutional crisis in Pakistan threatens to scupper its deal with the IMF, which would throw its already-precarious external situation into very dangerous territory. Meanwhile, political meltdown in Sri Lanka, where an external crisis is already well …
4th April 2022
Omicron hit to be even smaller than first thought GDP data released over the next month or so are likely to show that recoveries continued everywhere across the region (excluding China) in Q1. That’s despite the fact that almost all countries set fresh …
1st April 2022
Tough times ahead for Asia’s export-focussed industry While Korean trade data show exports remained buoyant, regional Manufacturing PMIs point to lost momentum. With headwinds to export-focussed industry mounting, there are tougher times ahead. March PMIs …
The Bank of Thailand (BoT) left interest rates unchanged at its meeting today and suggested that it would continue to look through a temporary rise in inflation to support the economic recovery. We are sticking with our view that the central bank will …
30th March 2022
Successful vaccination campaigns allowed governments to keep economies open during the recent Omicron waves, and our Mobility Trackers suggest that activity held up much better than we had originally anticipated. Indeed, GDP figures for Vietnam published …
29th March 2022
Economy resilient but headwinds growing Vietnam’s economy recorded solid growth in the first quarter of the year as the economy brushed off the impact of the Omicron wave, but while we expect the recovery to continue over the coming months, new headwinds …
Doves in the ascendency Dovish comments from policymakers over the past week support our view that central banks in South East Asia will buck the trend of global tightening and leave interest rates unchanged over the coming months. The central bank in the …
25th March 2022
Yesterday’s easing of virus restrictions in Singapore exceeded what we had expected, and now means the risks to our above-consensus growth forecast of 4.0% this year are to the upside. The measures are also likely to add to inflationary pressures, further …
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today and will be in little hurry to tighten policy in the months ahead, with supporting the economic recovery set to take priority over combatting inflation. Today’s …
24th March 2022
Sri Lanka has no easy choices left as it looks to dig itself out of its economic mess. Outright default or a financing deal with China remain options, but the government appears to be favouring an agreement with the IMF. The policy tightening and …
23rd March 2022
Taiwan new export orders picked up again in February, but we don’t expect this strength to continue as high oil prices start to weigh on consumer spending around the world. Meanwhile, the risks to global supply chains from COVID-related disruption have …
21st March 2022
More rate hikes despite Omicron surge New daily cases of COVID-19 in Korea hit a high of over 600,000 on Thursday, and over the past week an average of just under 1% of the population has been testing positive for the virus every day. This is one of the …
18th March 2022
Taiwan’s central bank (CBC) today unexpectedly raised its main policy rate by 25bps to 1.375%, but we doubt this is the start of an aggressive tightening cycle given the mounting downside risks to growth and the relative weakness of inflation. We had …
17th March 2022
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and the weakness of inflation and strong performance of the rupiah mean the tightening cycle is likely to be very gradual. The decision came as little surprise and was …
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 …
