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Emerging Asia

Pakistan

Pakistan: Further tightening needed, as IMF talks begin

High inflation and the fall in the currency were the two key factors behind the State Bank of Pakistan’s (SBP) decision to raise interest rates by a further 150bp today. More tightening looks inevitable, and much will depend on whether the government can agree terms with the IMF over the resumption of its US$6bn loan programme. Asia Drop-In (26th May, 0900 BST/16:00 SGT): Can Asia remain the low inflation exception? Join our 20-minute briefing about the region’s price and policy outlooks. Register here.

23 May 2022

Asia late to tightening but won’t have to go far

Central banks in India, the Philippines and Malaysia have all raised interest rates for the first time this cycle in recent weeks, and we expect further hikes next week in Indonesia, Korea and Pakistan. But with inflation set to fall back in the second half of the year and growth likely to weaken, tightening cycles are unlikely to be aggressive. Our forecasts are generally more dovish than the consensus.
Asia Drop-In (26th May, 0900 BST/16:00 SGT): Can Asia remain the low inflation exception? Join our 20-minute briefing about the region’s price and policy outlooks. Register here.

20 May 2022

New headwinds emerge

Our GDP growth forecasts are generally above the consensus, but with higher commodity prices and weaker global demand set to weigh on economic recoveries, growth across much of Emerging Asia will be slower than we had anticipated in our last Outlook. Most central banks in the region are likely to raise interest rates this year – the exceptions are parts of South East Asia and China (where we expect a rate cut). However, with growth set to slow and inflation relatively subdued, Asian central banks will tighten policy less aggressively than those elsewhere, and our interest rate forecasts are more dovish than most.

28 April 2022
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What next for Pakistan and Sri Lanka?

Recent tumultuous events in Pakistan and Sri Lanka should eventually pave the way for IMF deals in both countries, which over time may lead to the return of economic stability. However, this is by no means guaranteed. And painful periods of austerity are likely to precede that. We are sending this Weekly one day earlier than usual because our offices are closed for Good Friday on Friday, 15th April

Five questions (and answers) on Pakistan’s crisis

We held a Drop-In on the political and economic problems facing Pakistan earlier today (see an on-demand recording here). This Update answers some of the most common questions that we received.

Pakistan: major challenges await new PM

The main challenge facing Shehbaz Sharif, who today replaced Imran Khan as prime minister of Pakistan, is stabilising the economy. The key to achieving this is a deal with the IMF. The price for any further support will be a further tightening of fiscal and monetary policy. While this will cause growth to slow in the near term, it is also Pakistan’s best hope of a avoiding a full-blown crisis. Drop-In (13th April, 16:00 SGT/09:00 BST): Will political turmoil in Pakistan and Sri Lanka lead to debt defaults? Join our EM economists this Wednesday for a discussion about economic and political turmoil in South Asia. Register now

Pakistan: PM Khan stumped, emergency hike by SBP

In Pakistan, the week began with a constitutional crisis and it will likely end with a new Prime Minister at the helm following the Supreme Court ruling on Thursday. Prime Minister Khan’s successors will face challenges on many fronts. And they will need to ensure that Pakistan remains on an IMF programme to steer the economy away from an external crisis. In response to the developing situation, the central bank hiked rates in an emergency meeting by 250bps – its largest hike since 1996.

Flaring political risks a major threat in South Asia

A constitutional crisis in Pakistan threatens to scupper its deal with the IMF, which would throw its already-precarious external situation into very dangerous territory. Meanwhile, political meltdown in Sri Lanka, where an external crisis is already well underway, has dashed hopes of the country securing its own IMF deal and once again ramped up the risk of sovereign default.

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