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Emerging Asia

Taiwan

Manufacturing PMIs, Korea Trade (Apr.)

Regional Manufacturing PMIs point to a further worsening of industry conditions, chiming with Korean trade data which suggest a major softening of external demand. Both reinforce the view that headwinds to Asia’s export-focussed industry are mounting and that there are tougher times ahead. 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

3 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

Taiwan GDP (Q1, provisional)

A further pickup in exports drove continued strong Taiwanese GDP growth in Q1, but we expect the economy to lose momentum over the coming quarters as the external sector weakens and COVID-19 weighs on consumer spending.

28 April 2022
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Signs of exports softening, new governor at the BoK

There are growing signs that demand for the region’s exports are starting to soften. Weaker external demand will add to the headwinds facing the region’s economies, which are already being hit by the war in Ukraine and jump in global oil prices. Meanwhile, in his first public comments since becoming BoK governor on Thursday, Rhee Chang-yong acknowledged the difficult trade-off he faces between clamping down on inflation and supporting the economy. The even-handed tone of the new governor adds weight to our view that the BoK will raise interest rates no more than twice more this year.

Inverted yield curves a poor signal for EM downturns

While yield curves have inverted in a number of emerging markets (and look likely to do so in several others in the coming months), they don’t have a good track record in predicting recessions in the emerging world. In most EMs, we think that growth will be softer this year than last, but outright contractions in GDP are unlikely. Emerging Markets Drop-In (7th April, 10:00 EDT/15:00 BST): Join us on Thursday for our next monthly Emerging Markets briefing where our economists will discuss how the Ukraine war’s spillovers are helping and hurting EMs, and the impact of global central bank tightening. Register here

Manufacturing PMIs, Korea Trade (Mar.)

While Korean trade data show exports remained buoyant, regional Manufacturing PMIs point to lost momentum. With headwinds to export-focussed industry mounting, there are tougher times ahead.

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.

More dovish signals from South East Asia

Dovish comments from policymakers over the past week support our view that central banks in South East Asia will buck the trend of global tightening and leave interest rates unchanged over the coming months.

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