Slowing growth, falling inflation and dovish central banks

A strong rebound in tourism provided a big boost to growth in Thailand and Hong Kong last quarter, which along with China, were the three best-performing countries in Emerging Asia in Q1. But for the rest of the region, the GDP figures painted a depressing picture. Taiwan and Singapore both contracted, while growth in Korea was very weak. There were also marked slowdowns in Vietnam and the Philippines. Meanwhile, price pressures have continued to ease. Inflation is now back to target in Vietnam, Thailand and India, and is falling back sharply elsewhere too. Pakistan is the only country where inflation is still on an upward trend. Against this backdrop, central banks have become more dovish. Vietnam has already started cutting interest rates, while the Philippines last week joined other central banks in bringing its own tightening cycle to an end. We think the Bank of Korea will be next to cut, most likely in August, and we will be looking out for signs that the central bank is becoming more dovish at its scheduled monetary policy meeting tomorrow.