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Resurgent infections threaten recovery

Asia’s emergence from the pandemic has been threatened recently by a resurgence in infections across parts of the region. Most of South Asia, the Philippines and Thailand have had to introduce new restrictions to contain outbreaks of the virus, and we have cut our growth forecasts for a number of countries to reflect the worsening outlook. Elsewhere, China and Taiwan have already fully recovered from the crisis, while Vietnam is not far behind. Headline y/y growth rates in these economies will be flattered by base effects over the next couple of quarters, but in q/q terms growth will continue to slow. Central banks across the region are in no rush to tighten monetary policy. External factors won’t compel policymakers to tighten, and with inflationary pressures very weak, interest rates are likely to be kept low to support economic recoveries.

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