Emerging Asia

Emerging Asia Economics Weekly

Asia reopens, more hikes in Korea & Sri Lanka

Countries across Emerging Asia are making renewed efforts to reopen their borders to boost flagging tourism sectors. However, the recovery is likely to be very gradual, not least because China (which was the source of around one-third of all tourists to the region before the pandemic) is in no rush to reopen its border. The poor prospects for tourism will weigh heavily on the Thai baht over the coming year and lead to further balance of payments strains in Sri Lanka. Meanwhile, the central banks of Korea and Sri Lanka left interest rates unchanged at their scheduled meetings this week, but we think it won’t be long before both raise interest rates again

15 October 2021

Emerging Asia Economics Update

Singapore: no further monetary policy changes in 2022

The Monetary Authority of Singapore (MAS) tightened policy today, as it looked past the lacklustre rebound in GDP last quarter and looked to curb further rises in inflation. Core inflation is unlikely to rise substantially next year, even as the recovery regains some momentum. As such, we think the MAS will leave policy on hold in 2022.

14 October 2021

Emerging Asia Economics Update

Bank of Korea on hold, but extended hiking cycle ahead

After leaving rates on hold today, the Bank of Korea gave strong signals of its intent to hike again in November. And given the Bank’s hawkish comments, we are adding another rate hike into our forecast for next year, bringing the total to a further 75bps of tightening in 2022.

12 October 2021

Key Forecasts

Table 3: Financial Markets

Forecasts

Forecasts

Currency

Latest

End

End

End

Stock Market

Latest

End

End

End

(15th Oct.)

2021

2022

2023

(15th Oct.)

2021

2022

2023

South Korea

KRW

1,184

1,150

1,130

1,100

KOSPI

3,010

3,250

3,400

3,550

Singapore

SGD

1.35

1.36

1.38

1.36

Straits Times

3,179

3,250

3,450

3,600

Taiwan

TWD

28.1

28.0

29.5

28.5

TAIEX

16,633

17,200

18,200

19,100

Pakistan

PKR

171

175

180

190

Karachi 100

44,334

43,400

49,000

53,000

Sri Lanka

LKR

201

210

220

225

Colombo All

9,622

8,000

8,100

8,250

Indonesia

IDR

14,077

14,750

15,500

15,750

Jakarta.

6,620

5,900

6,450

6,900

Malaysia

MYR

4.15

4.25

4.40

4.30

KLCI

1,594

1,625

1,750

1,925

Philippines

PHP

50.7

52.0

54.0

54.0

PSEi

7,174

7,450

8,325

9,025

Thailand

THB

33.3

34.0

36.0

34.0

Thai SET

1,641

1,675

1,900

2,025

Vietnam

VND

22,757

22,500

22,250

22,000

Ho Chi Minh

1,392

1,275

1,325

1,375

Sources: Bloomberg, Capital Economics


Asia reopens, more hikes in Korea & Sri Lanka

Emerging Asia Economics Weekly

18 October 2021

Our view

The economic outlook across South East Asia has improved over the past month or so as a sharp decline in virus cases has allowed governments to ease back restrictions.  Of course, if cases start to rise again and hospitals come under renewed pressure, restrictions may need to be reimposed, but with vaccine rollouts across the region accelerating, this risk is becoming less of a concern. Interest rates in many countries are at record lows. Whereas the consensus and financial markets are expecting many central banks to start tightening policy in 2022, we think rates will remain at their current levels in most countries until the end of next year. With GDP still well below potential in most parts of the region, central banks have little to fear from inflation. Meanwhile, large current account surpluses mean external factors are unlikely to push central banks into tightening. A key exception is Korea, where further tightening is imminent.

Latest Outlook

Emerging Asia Economic Outlook

Rates to remain low as virus disruption worsens

Surging infections across South East Asia and the slow progress of vaccine rollouts mean that COVID-19 will continue to cause widespread economic disruption across large parts of the region until at least the end of the year. We have cut our GDP growth forecasts for a number of countries. Interest rates in many countries are at record lows. Whereas the consensus and financial markets are expecting many central banks to start tightening policy in 2022, we think rates will remain at their current levels in most countries until at least the end of next year. Korea is an important exception. Tightening there is imminent.

20 July 2021