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Emerging Asia


Tightening cycles to be gradual

Central banks across the region have recently turned more hawkish. Over the past month or so, policymakers in Korea, Taiwan, Singapore, Sri Lanka, India and Pakistan have all tightened policy. Governor Benjamin Diokno in the Philippines has also hinted that the central bank there will raise interest rates soon, and we have adjusted our interest rate forecast. We now expect the BSP to hike rates by 50bps this year. The main concern in most places is inflation, which is now above target in around half of the countries covered by our Emerging Asia services. However, while headline rates have increased in recent months, inflation across the region remains much lower than elsewhere in the world. And unlike in other parts of the global economy, we expect inflation in Asia to drop back to target by the end of the year as base effects become more favourable. This supports our view that tightening cycles will be relatively gradual compared with other regions. Our interest rate forecasts are more dovish than the consensus and what is being priced in by financial markets. EM Drop-In (5th May, 10:00 EDT/15:00 BST): Join Shilan Shah for our latest monthly session on the big macro and markets stories in EMs. This month, Shilan and the team will be talking Russian gas, FX weakness and surging food prices. Register now

29 April 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

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

14 April 2022
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MAS tightening and strong economy will support SGD

The Monetary Authority of Singapore (MAS) tightened monetary policy again at its meeting today. With growth set to remain strong and core inflation likely to stay elevated, we expect the MAS to maintain its tight policy stance for at least the next couple of years. As such, the Singapore dollar is set for an extended period of appreciation, including against a strong US dollar.

Q1 GDP data to paint a picture of resilience

GDP data released over the next month or so in Emerging Asia are likely to show that recoveries continued everywhere across the region (excluding China) in Q1. That’s despite the fact that almost all countries set fresh records for daily new virus cases, with some experiencing full-scale outbreaks for the first time. Omicron is now fast receding, but it’s not all plain sailing from here. Other headwinds to growth are mounting from the surge in global commodity prices and the potential disruption from COVID outbreaks in China.

Omicron recedes, but other headwinds emerge

Successful vaccination campaigns allowed governments to keep economies open during the recent Omicron waves, and our Mobility Trackers suggest that activity held up much better than we had originally anticipated. Indeed, GDP figures for Vietnam published earlier today suggest the economy brushed off the impact of Omicron this quarter. However, while the risks to growth from COVID-19 are fading, new headwinds are emerging. The war in Ukraine and the surge in global oil prices will drag on the purchasing power of consumers, while a slowdown in the global recovery will weigh on the region’s exports. We recently cut our 2022 forecasts for regional GDP growth by 0.5%. Meanwhile, rising virus cases in China and the lockdowns that have been introduced in some major cities in the country raise the risk of further disruption to global supply chains. Vietnam’s close integration into Chinese supply chains makes it the most vulnerable country in Asia to problems in China.

Singapore reopening will add to inflationary pressures

Yesterday’s easing of virus restrictions in Singapore exceeded what we had expected, and now means the risks to our above-consensus growth forecast of 4.0% this year are to the upside. The measures are also likely to add to inflationary pressures, further increasing the chance that the Monetary Authority of Singapore (MAS) will tighten policy at its meeting next month.

New GDP growth forecasts

We are cutting our GDP growth forecasts for many parts of emerging Asia in response to the surge in global energy prices and the war in Ukraine.

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