Vietnam: Is the worst over?

With cases of COVID-19 in Vietnam falling sharply and the government easing restrictions, factories are starting to reopen, and the latest data suggest the worst is now over for the country’s manufacturing sector. However, with backlogs of work mounting up, disruption is likely to last for some time.
Gareth Leather Senior Asia Economist
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Inflation exacerbates economic crisis in Sri Lanka

The economic situation in Sri Lanka is going from bad to worse, with a surge in inflation undermining the credibility of the central bank (CBSL) and making a debt default all the more likely.

3 December 2021

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How big a threat is Omicron to Asia?

Asian economies, like those elsewhere, have adapted to living with COVID-19 restrictions so that the impact of any tightening would be smaller than it was last year. And unlike in many EMs, there is still room for fiscal and monetary policy to be loosened if prospects took a turn for the worse. Asian exporters could also benefit if a new wave of global infections led to increased demand for consumer goods.

2 December 2021

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South East Asia rebounding, but disruption set to linger

Disruption to industrial activity across South East Asia has eased considerably in the past few weeks, helping to relax global supply constraints, especially in the automotive sector. However, a renewed surge in COVID infections in Vietnam deserves close attention. Drop-In: India – How much scarring will the pandemic leave? 10:00 ET/15:00 GMT, Wednesday 1st December Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December

1 December 2021

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PacMan joins the race, baht set for further falls

The next presidential election in the Philippines is not until May, but the contest is already generating plenty of headlines with former boxing world champion Manny Pacquiao (PacMan to his fans) this week announcing his intention to run. He is joined by several other presidential hopefuls, including a former actor and two children of former presidents. We will have more to say once the candidates outline their policy platforms, but the uninspiring list of presidential hopefuls bodes poorly for the country’s prospects. Meanwhile, policymakers in Thailand appear unfazed by the recent decline in the baht, which fell by over 4% against the US dollar last month. We think further weakness is likely over the coming year.

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Asian central banks in little rush to raise rates

Over the past month or so, the central banks of Korea, Pakistan and Sri Lanka have all raised interest rates, but we don’t think other countries will be in any rush to follow suit. There is certainly little to worry about on the inflation front. Pakistan, India and Sri Lanka are the only three countries where headline inflation is above 5% y/y. With GDP still well below potential in most parts of the region, underlying price pressures will remain subdued. Similarly, with the exception of Sri Lanka and Pakistan, where large current account deficits are putting downward pressure on currencies, external factors are unlikely to prompt central banks into hiking rates. Although the US Fed is likely to announce plans to taper its asset purchases later this year, large current account surpluses mean Asian economies are well placed to withstand any sudden shift in capital flows that tighter monetary policy in the US could trigger. Meanwhile, unlike in Korea, there is no sign elsewhere in Asia that low interest rates are fuelling a rise in financial risks. Credit growth has slowed in many countries, with policymakers in Indonesia and the Philippines encouraging commercial banks to lend more. Finally, most countries still have large output gaps, and with the virus continuing to cause significant economic disruption across the region, central banks will remain keen to support economic activity.

29 September 2021

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Thailand: rates to stay low for an extended period

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29 September 2021
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