Emerging Asia

Emerging Asia Economics Weekly

Emerging Asia Economics Weekly

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

Emerging Asia Economics Weekly

Recent rate hikes not the start of a trend

Attention over the past week has been on the region’s more hawkish central banks, following rate hikes in Korea and Pakistan. Both countries, along with Sri Lanka (which unexpectedly left rates unchanged at its meeting on Thursday) are likely to raise interest rates further over the coming months. But these countries are very much the exception. For the rest of the region, we think interest rates will remain on hold as central banks look to keep monetary policy loose to support recoveries. Meanwhile, virus cases are rising again in Vietnam. While restrictions have been tightened, they have so far been fairly light touch, including a closure of bars and nightclubs and capacity limits on restaurants in some southern provinces. Nevertheless, the jump in cases will be watched closely by global carmakers, which were hit hard by the disruption from previous factory closures.   Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report Drop-In: India – How much scarring will the pandemic leave? 10:00 ET/15:00 GMT, Wednesday 1st December https://event.on24.com/wcc/r/3535749/63CC51718846E8FF3D871827AC84AF1E?partnerref=report

26 November 2021

Emerging Asia Economics Weekly

Vaccine progress, external turnaround in Indonesia

After a slow start, countries across South East Asia are now making encouraging progress with vaccine rollouts. The rise in coverage should reduce the need for further lockdowns and set the stage for a sustained recovery over the coming quarters. Meanwhile, although central banks in Emerging Asia are in no hurry to tighten policy, the coming week will focus attention on two exceptions to that rule. Korea and Sri Lanka are both expected to raise interest rates at their meetings on Thursday.

19 November 2021
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Emerging Asia Economics Weekly

South East Asia disruption eases, Sri Lanka in peril

Recent data from Malaysia and Vietnam suggest that virus-related disruption is continuing to ease. This should help alleviate some of the supply constraints currently holding back growth elsewhere in the world. Meanwhile, the risk of a sovereign debt default in Sri Lanka is growing after the country’s foreign exchange reserves dropped again in October.

Emerging Asia Economics Weekly

The end of king coal, Korea inflation worries

If the ambitious targets laid down by the 2015 Paris Agreement are to be met, then global coal consumption will need to fall sharply and eventually be eliminated. This poses a huge challenge for many countries in Emerging Asia, several of which are dependent on coal for around 50% of their energy needs. But provided the transition to a green economy is done gradually, we think it can be achieved with relatively little cost to economic growth. Meanwhile, the rise in inflation in Korea in October adds to the reasons to think the central bank will hike rates at its scheduled meeting later this month.

Emerging Asia Economics Weekly

Mixed Korea activity data, climate change

The latest batch of activity data from Korea indicate that the automotive sector was hit hard by shortages last month, but that the service sector is enjoying a recovery. The provisional Q3 GDP figures released earlier this week look likely to be revised up. In any case, there are good reasons to expect the recovery to regain momentum in Q4 and we doubt the soft Q3 GDP data will cause the Bank of Korea to pause its tightening cycle.

Emerging Asia Economics Weekly

GDP to rebound after gloomy Q3

The next few weeks will see the publication of a host of third quarter GDP figures from across the region. While the data are likely to paint a downbeat picture, output should rebound strongly in the final quarter of the year. That said, the recovery is coming from a low base – GDP in most countries is still well below pre-crisis levels – and the region will enter 2022 with lots of spare capacity. This will help keep a lid on underlying price pressures and is a key reason why we think central banks in the region will be in little hurry to tighten policy.

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

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