Two non-consensus calls on monetary policy

There are four major monetary policy meetings scheduled in the region next week. While we expect the central banks of Indonesia and Taiwan to leave rates unchanged, we are pencilling in a hike by the State Bank of Pakistan (SBP) and a cut by Bangko Sentral Philipinas (BSP).
Gareth Leather Senior Asia Economist
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Asia reopens, more hikes in Korea & Sri Lanka

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14 October 2021

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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

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Encouraging signs in South East Asia

Virus outbreaks across South East Asia are in retreat. Having taken a severe hit from the most recent Delta wave, economic recoveries in the region should now resume. Falling virus cases and reopening should also help ease some of the supply-chain disruption caused by factory closures and workers having to quarantine.
We’re holding a week of online events from 27th September to accompany our special research series. Event details and registration here.

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Singapore struggling to live with COVID

Singapore’s decision to reimpose some restrictions despite the country’s rapid vaccine rollout raises questions about its long-term strategy of living with COVID-19. The government’s caution will hold back the recovery in the near term, and its recent stumbles suggest other places still pursuing a zero-COVID policy will be in little hurry to follow Singapore’s lead.

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Exports won’t come to the rescue in H2

  • Q2 GDP data released over the past month or so did not show a repeat of the across-the-board rises in exports seen in previous quarters, but the external sector still proved an important prop to GDP in many places. Thailand’s economy unexpectedly grew last quarter, as an increase in goods exports more than made up for a slump in domestic demand. Strong external demand also went a long way in offsetting sharp falls in private consumption in Taiwan and Malaysia. However, this is unlikely to continue. Recent monthly trade data show that merchandise exports have started to level off. And with high virus cases and strict containment measures weighing heavily on domestic demand across large parts of the region, we have pencilled in large falls in GDP for Thailand, Indonesia and Vietnam this quarter. The poor outlook means monetary policy is likely to be loosened further. We think the Bank of Thailand will cut rates by 25bps in September. The central bank in the Philippines is also likely to loosen policy next month. While we don’t have cuts pencilled in elsewhere, there is a growing chance that other central banks will follow suit.

31 August 2021
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