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Asian markets would of course be vulnerable to a retreat of global capital if the debt crises in Europe and the US intensified. But any reversal of flows will be temporary. Dealing effectively with inflows is likely to be a central policy challenge in the …
20th September 2011
The Reserve Bank of India (RBI) raised its repo rate by 25bp to 8.25% today, as anticipated, citing further increases in core inflation. Provided the euro-zone crisis does not escalate dramatically in the coming weeks, we think the RBI is likely to …
17th September 2011
The Reserve Bank of New Zealand (RBNZ) left its key interest rate at 2.5% today, as anticipated, citing the deterioration in external conditions and escalation in financial market risks. The RBNZ still expects to be able to reverse the “insurance cut” …
16th September 2011
Given the sharp deterioration in the global economic outlook in the past couple of months, the Reserve Bank of India (RBI) will give serious consideration to downside risks to growth when it meets on Friday. Nonetheless, for several reasons we doubt India …
13th September 2011
Central banks in Indonesia, Malaysia, Korea and the Philippines all kept their main policy rates on hold today, as expected, reflecting heightened concern over the outlook for the global economy. This year, more policy tightening is only likely in Korea, …
9th September 2011
Economic growth rebounded strongly in the second quarter, strengthening our view that Australia’s recovery is intact despite the fall in output in Q1. Worries about the global outlook obviously add some uncertainty. But, for now, the Reserve Bank of …
8th September 2011
A combination of increasing political violence in Karachi, falling cotton prices, an unsustainable fiscal position and high inflation mean the outlook for Pakistan’s fragile economy remains bleak. … Troubles mount for Pakistan’s crisis-hit …
7th September 2011
While the Reserve Bank of Australia (RBA) is widely expected to leave its cash rate at 4.75% on Tuesday, the swap market suggests that the cash rate will be aggressively cut over the next 12 months. This seems unlikely to us. Household spending has held …
6th September 2011
The Philippines is the latest country within emerging Asia to report weak Q2 GDP data. Nonetheless, as with elsewhere in the region, growth should rebound in coming quarters as temporary supply-chain problems following Japan’s mid-March disaster continue …
1st September 2011
India’s second quarter GDP figures, which showed only a marginal deceleration from the first quarter, should dispel any concerns in the Reserve Bank of India (RBI) that the economy is struggling to cope with tighter monetary policy. Consequently, the RBI …
31st August 2011
India’s Q2 GDP data will be released on Tuesday and are likely to show that growth slowed. We forecast growth of 7.5% y/y in Q2, down from 7.8% in Q1. Monthly output data suggest that the slowdown will have been led by the manufacturing sector. …
30th August 2011
Q2 GDP figures reported so far within emerging Asia have tended to be weak, with some analysts suggesting that sluggish growth in the US and euro-zone have stalled growth in Asia. This seems premature to us. Temporary supply-chain disruptions following …
27th August 2011
August price data highlight growing concerns over the stubbornly-high rate of inflation in Vietnam. Despite the backdrop of a weak global economy, we believe that the State Bank of Vietnam (SBV) is likely to increase its interest rates further over the …
26th August 2011
In spite of growing downside risks to global growth, the Bank of Thailand (BoT) raised its repo rate by 25bp to 3.5% today. The BoT’s decision-making is being heavily influenced by the outlook for local fiscal policy. We expect another 25bp hike in one of …
25th August 2011
Thailand is the latest country within emerging Asia to have reported weak GDP data for the second quarter. Nonetheless, worries that slower growth in the West has already stalled growth in Asia look overblown to us. … How bad was Q2 GDP in Thailand and …
23rd August 2011
The Bank of Thailand announces its latest interest rate decision on Wednesday. Policymaking has been complicated by global worries intensifying at a time when local fiscal policy looks set to be loosened. On balance, we expect the repo rate to be kept at …
The Central Bank of Sri Lanka (CBSL) kept interest rates on hold today, as expected. Although headline inflation crept up slightly in July, the central bank remains confident that inflation will start to fall again soon, while it remains wary of the …
20th August 2011
Malaysia’s economy grew at a slower pace in Q2 than it did in Q1. Although downside risks for exports have increased, domestic demand should continue to support growth in coming quarters. The upshot is that, provided global demand does not deteriorate …
18th August 2011
India’s latest wholesale price data show that inflation remains uncomfortably high. Meanwhile, we believe that a hard landing for the economy is unlikely. The upshot is that, in spite of the volatility in global financial markets, we still think that the …
17th August 2011
At the time of the earthquake in Japan in March, many governments in the region feared the potential impact on their economies. However, although Taiwan and the Philippines saw demand for their exports to Japan fall, other countries in the region have …
Singapore’s short-term swap offer rates (SOR) turned negative last week, prompting questions as to whether this amounts to an implicit policy easing. We think not. The negative short-term SOR is likely to be a reflection of safe haven flows, rather than a …
Oil prices have slipped back on fears that the world economy may be heading for another downturn. What’s more, our in-house view is that oil prices have further to fall. The impact in emerging Asia of a further fall in oil prices will vary from country to …
16th August 2011
The Bank of Korea (BoK) kept its base rate at 3.25% today, as expected. Volatility in the financial markets and concerns over the outlook for the global economy are likely to keep the BoK on the sidelines for a while. Nonetheless, provided a sharp global …
12th August 2011
Fear is growing in Asia over the outlook for the global economy. Although not our forecast, another sharp fall in global output would see Asia hit hard initially. However, as in 2009, Asia’s strong economic fundamentals should ensure that the region would …
11th August 2011
Bank Indonesia (BI) kept its reference rate on hold at 6.75% today, as expected. Declining headline inflation and greater uncertainty over the outlook for the global economy were the main factors behind BI’s decision. Provided a sharp global economic …
10th August 2011
Even before S&Ps downgrade of US debt on Friday, many governments in Asia had been stepping up efforts to diversify their foreign exchange reserves away from US dollars. However, as long as Asian governments continue to intervene heavily in foreign …
9th August 2011
Despite benefiting from generally better fundamentals, no emerging market (EM) is immune from the deepening problems in the US and Europe. Growth everywhere is likely to slow over the next year and, while Asia should continue to outperform, we are …
Share prices in Emerging Asia registered losses as worries over the global outlook intensified. However, equities in Emerging Asia fell by less than in other parts of the world. This makes sense given that fears over slowing growth are focused elsewhere, …
8th August 2011
Today’s Q2 GDP data for Indonesia confirm that growth remained brisk, underpinned by rising commodity exports and resilient domestic demand. We maintain our view that further monetary tightening at some point makes sense given that the policy rate is …
6th August 2011
Sluggish retail sales have prompted media reports that Australia’s shoppers have gone on strike. However, overall consumer spending has held up much better. The upshot is that we do not expect the Reserve Bank to be unduly concerned. We still forecast …
Emerging Asia is not in any imminent danger of a sovereign-debt crisis: debt levels in most countries are low, while strong growth makes it easier to finance debt burdens. However, another sharp downturn in global growth would potentially be a big problem …
4th August 2011
The Philippines has seen its fiscal deficit fall sharply during the first six months of the year. Although revenue growth has been growing strongly, the fact that government spending has fallen sharply this year is a concern. The budget deficit should …
Purchasing Manager Indices (PMIs) released over the past two days for India, Taiwan, Australia and Singapore all worsened considerably. Manufacturing across Asia is likely to remain subdued for the rest of the year, amid weaker demand for the region’s …
3rd August 2011
In an unexpected move, the State Bank of Pakistan (SBP) at the weekend cut its main policy rate by 50bp to 13.5%. The cut came despite continued strong inflationary pressures, and follows growing concern that the government is putting pressure on the …
2nd August 2011
Policymakers across the region are rightly concerned about the potential consequences of a debt crisis in the US. We believe that the impact on Emerging Asia’s economies of a one or two notch downgrade of US debt by the main debt-rating agencies is likely …
The Reserve Bank of New Zealand (RBNZ) has signalled that its policy rate will soon be raised from a post-earthquake emergency level, provided its worst fears for the global economy do not materialise. We now expect the RBNZ’s cash rate to be hiked by …
29th July 2011
The Philippines’ central bank (BSP) kept its overnight rate on hold at 4.5% today, however, it did still tighten monetary policy by raising the reserve requirement ratio. Although inflation is above the central bank’s 3-5% target, downside risks to growth …
Today’s Q2 GDP data from Korea confirm that the economy grew at a slower pace in the second quarter than it did in the first. Nonetheless, we believe that Korea’s policymakers will continue to focus on tackling inflation even at the expense of slow growth …
28th July 2011
The Reserve Bank of India (RBI) surprised markets with a 50bp rate hike today, lifting the repo rate to 8.0%. With the accompanying policy statement reinforcing the RBI’s hawkish policy stance, we now expect rates to reach 8.5% by year-end and to fall …
27th July 2011
The Monetary Authority of Singapore (MAS) revised up its 2011 inflation forecast last week while data out today show that inflation rose in June. Nonetheless, talk of runaway price pressures looks overdone to us. In addition, external risks have …
26th July 2011
The Philippines’ central bank (BSP) will announce its latest policy decision on Thursday. As with elsewhere in the region, the BSP faces a dilemma as it looks to keep inflationary pressures under control amid growing external risks. Although it is a close …
Inflation remains a concern across most of the region. Central banks in Taiwan and Thailand have hiked their policy rates in recent weeks, while the central bank in Malaysia increased its reserve requirement ratio. More policy tightening is likely this …
22nd July 2011
Growth in remittances from Overseas Filipino Workers (OFW) to the Philippines has slowed since the 2008-09 global crisis. However, we believe that remittances growth is likely to stabilise rather than worsen further in the remainder of 2011. The upshot is …
20th July 2011
Emerging Asia’s currencies have strengthened against the US dollar so far this year in large part because local policymakers have allowed appreciation to combat inflation. However, with inflation set to peak by the end of the year across the region and …
19th July 2011
Today’s price data from India show that both headline and core inflation rose further in June. What’s more, we expect the headline rate to reach double-digit levels in the third quarter. While growth appears to have slowed, there is little reason to …
15th July 2011
Singapore’s advance estimate of GDP in the second quarter shows that the economy contracted due to weakness in the manufacturing sector. However, the expansion should resume in the second half of this year in spite of weaker global conditions. We still …
The Bank of Korea (BoK) held its base rate at 3.25% today, as expected. Nonetheless, the policy rate is still below pre-crisis levels, while core inflation has further to climb. The upshot is that the base rate is likely to be hiked in August or …
The Bank of Thailand (BoT) raised its repo rate by 25bp to 3.25% today, as expected. Fiscal policy is likely to be looser under the incoming government than the outgoing administration. The upshot is that we expect more monetary tightening this year. We …
14th July 2011
Bank Indonesia (BI) kept its reference rate at 6.75% today, as expected. Declining headline inflation and greater uncertainty about the outlook for the global economy were the two main factors behind BI’s decision to keep rates on hold. Nonetheless, …
13th July 2011
The US government announced on Sunday that it has suspended $800m in military aid to Pakistan amid a further deterioration in the relationship between the two countries. The announcement is clearly a blow to Pakistan’s fiscal consolidation plans. However, …
12th July 2011
