Policy loosening begins

As fears mount over the outlook for the global economy and inflationary pressures continue to ease, policymakers across the region are increasingly looking to support demand. Over the past month, governments in the Philippines and Malaysia have announced big increases in spending, while the central banks of Indonesia and Pakistan have cut interest rates. With many of Asia’s export-orientated economies vulnerable to a downturn in global demand, we forecast it is only a matter of time before other central banks start to cut rates. The two exceptions to this are India and Vietnam, where more policy tightening is likely amid persistently high inflation.