Asia Central Banks
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May 7, 2024 1:22 PM UTC
Bottom line: Indonesia's Q1 GDP — released on May 6 — saw growth rebound to 5.1% yr/yr from 4.90% yr/yr in Q4 2023. While private consumption continued its ascent, government expenditure emerged as the key driver of Indonesia's growth narrative. Private consumption was supported by festive deman
May 3, 2024 10:45 AM UTC
While U.S. economic developments, plus Fed policy prospects, will be important in terms of EM currency developments, domestic politics and fundamentals will also be decisive. These can keep the South Africa Rand volatile in the remainder of 2024, given the risk of a coalition government and African
April 29, 2024 12:42 PM UTC
Minutes of the latest Reserve Bank of India (RBI)'s monetary policy committee meeting revealed a nuanced outlook blending optimism regarding India's growth trajectory with apprehensions surrounding inflationary risks. While upbeat macroeconomic indicators paint a favourable picture, the committee re
April 16, 2024 8:33 AM UTC
Q1 GDP upside surprise was driven mainly by public sector investment. With the government still to implement the Yuan 1trn of special sovereign bonds for infrastructure spending, public investment will likely remain a key driving force. However, the breakdown of the March data show that retail s
April 15, 2024 12:35 PM UTC
India's inflation trajectory in March 2024 showcased divergent trends in both consumer and wholesale price indices. While consumer inflation dipped to its lowest in ten months at 4.9% y/y, wholesale inflation rose to 0.5% y/y, driven by surging food prices. The outlook suggests gradual WPI escalatio
April 11, 2024 5:44 AM UTC
In line with our expectations, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) chose to maintain the policy repo rate at 6.5% in its latest meeting. The decision reflects their aim to gradually scale back stimulus measures while still supporting economic growth. It also unders
April 4, 2024 7:25 AM UTC
The Reserve Bank of India (RBI) is gearing up to announce its first monetary policy decision for FY25 (April-March) on April 5. For the upcoming meeting, we anticipate that the RBI will likely keep the repo rate unchanged at 6.5%, given the optimistic outlook for economic growth and still elevated i
March 26, 2024 9:01 AM UTC
In terms of spot EM FX projections domestic drivers remain critical, with a desire to avoid appreciation versus the USD for some countries. Fed easing in H2 2024 should however help EMFX more broadly and allow some recovery in spot rates (e.g. Indonesian Rupiah (IDR), South African Rand (ZAR)
March 20, 2024 11:00 AM UTC
China’s 5% growth target will likely be tough to meet with residential property investment likely to knock 1.0-1.5% off GDP and net exports a small negative. With sluggish private investment, this means some of the old engines of growth are not firing. Some additional fiscal stimulus will likely
March 18, 2024 8:28 AM UTC
The February monthly data shows unbalanced growth. Industrial production and public investment picked up, but retail sales slowed and residential property remains a negative drag on GDP. While H1 GDP growth will be ok, it will likely slow in H2 and we still stick to a forecast of 4.4% for 2024 a
March 15, 2024 8:51 AM UTC
Bottom Line: The PBOC decided not to cut the Medium-Term Facility (MTF) rate, but surprised by also withdrawing liquidity in what looks like a protest at the recent decline in government bond yields. A 10bps MTF cut should still arrive in Q2, but later rather than sooner.
March 11, 2024 8:29 AM UTC
Bottom Line: February China CPI surged to +0.7% v -0.8% Yr/Yr due to three factors. The late lunar New Year boosted CPI seasonally, while the good lunar New Year also boosted pork/food prices and travel prices. The bounce is unlikely to be sustained and we see a fall back to 0.3-0.4% Yr/Yr in Ma
March 5, 2024 9:43 AM UTC
Bottom Line: China’s 5% growth target will likely be tough to meet with residential property investment likely to knock 1.0-1.5% off GDP and net exports a small negative. With sluggish private investment, this means the old engines of growth are not firing. Some additionally fiscal stimulus will
March 4, 2024 10:30 AM UTC
Bottom Line: Taiwan new speaker, Han Kuo Yu, has a willingness to open dialogue with China. This does not stop China likely undertaking large scale military exercises in the spring around Taiwan, as it still seeks to pressure the incoming DPP president. However, we see the new Taiwan speaker elect
February 28, 2024 10:15 AM UTC
Bottom Line: China authorities leave the impression that further policy stimulus will likely be measured rather than aggressive. We feel that they are not pessimistic enough on the medium-term hangover from the residential property sector and this is why we are downbeat on 2024 GDP growth and beyo
February 23, 2024 10:42 AM UTC
The Reserve Bank of India's (RBI) latest monetary policy decision, as reflected in the minutes of the February Monetary Policy Committee (MPC) meeting, presents a nuanced landscape of optimism about India's growth prospects, juxtaposed with concerns over inflation risks. The views of various MPC mem
February 22, 2024 11:07 AM UTC
In a bid to support the stability of the Indonesian economy and the rupiah, Bank Indonesia (BI) has opted to keep its benchmark interest rate unchanged at 6% in its latest monetary policy committee decision today (February 21). This decision aligns with BI's commitment to balance economic growth whi
February 21, 2024 11:00 AM UTC
Despite a still overvalued Yuan, China authorities are reluctant to accept too much Yuan weakness for fear of causing domestic capital outflows and discontent with China’s government. At some stage, if GDP growth surprises on the downside, China authorities could decide that a controlled Yuan decl
February 20, 2024 9:17 AM UTC
A larger than expected 25bps cut in the 5yr Loan Prime Rate (LPR) has been delivered, but the 1yr LPR rate was unchanged given that PBOC reluctance to cut the 1yr Medium-Term Facility rate (MTF) this month. The 5yr LPR rate is not a game changer for residential property, as bigger policy moves are
February 13, 2024 10:34 AM UTC
Though economics would argue for a 4.5-5.0% growth target for 2024, politics will likely mean that a 5% growth target is chosen in March. With the residential property overhang, weak net exports with a shift of global supply chains and sluggish private sector business investment growth, this will
February 12, 2024 6:25 AM UTC
The Reserve Bank of India's Monetary Policy Committee, led by Governor Shaktikanta Das, chose to keep the repo rate unchanged at 6.5% for the sixth consecutive time, aiming to support ongoing economic recovery while ensuring a sustained decline in inflation. Despite signs of inflation moderation and
January 31, 2024 11:11 PM UTC
The RBI will keep the repo rate unchanged at 6.5% during the upcoming monetary policy committee meeting on February 8th. The current tight stance is expected to persist until at least mid-2024, as the central bank foresees inflation averaging 5.4% year-on-year in FY24, ending on March 31, 2024, befo
January 26, 2024 4:15 PM UTC
Bottom Line: In the 2half of the 2020’s GDP in DM economies will benefit from climate change investment, though the net positive impact will likely be modest on an annual basis. The impact on EM economies will be more mixed, as lack of fiscal space restrains the scale of green investment and some
January 17, 2024 9:24 AM UTC
Quarterly GDP is interesting and came in at 1.0% after the 1.3% quarterly gain in Q3. The trend in quarterly GDP (Figure 1) is also not consistent with 5% growth and the Yr/Yr will dip in Q1 2024 when the large gain in Q1 2023 drops out (due to the end of zero COVID policies). We maintain the 4.
January 12, 2024 9:25 AM UTC
Figure 1: China RRR (%)Source: Datastream/Continuum Economics
A senior PBOC official has hinted at an RRR cut on Tuesday (here), given the desire to sustain credit growth. Similar comments were evident last July before the RRR cut in September. We would argue that further monetary easing is l
January 9, 2024 2:24 PM UTC
Figure 1: Freight Cost Surge in Perspective
Source: DataStream
How Long?
Houthi rebels have been attacking some ships in the Red Sea in recent weeks. The key question is how long this will last? One line of thinking is that the Houthi attacks are part of Iran axis of resistance alongside attacks
January 5, 2024 9:00 AM UTC
The catch-up productivity argument would point towards 4-5% growth in China in the 2025-2030 period. However, we are concerned that the residential property downturn and rewiring of global supply chains will be persistent headwinds for China GDP growth in the coming years and that the adverse popu
January 3, 2024 10:30 AM UTC
Bottom Line: The full benefits of the latest AI wave will likely not kick in until the late 2020/early 2030’s.However, 5G over the last couple of years has been enabling more connectivity via the Internet of Things and allowing more big data analysis, including AI tools and algorithms. In the 2hal
December 15, 2023 10:06 AM UTC
Our Forecasts
Source: Continuum Economics
Policy Stimulus Insufficient to Stop Slowing
China is facing a number of headwinds that will make 5% growth difficult to achieve in 2024. Key issues include:
· Property construction downturn. China authorities have undertaken
November 28, 2023 12:01 AM UTC
On the chart, USD/CNH has turned up from the 7.1285 low to consolidate sharp losses from the November high. Consolidation around the 7.1500 level tracing out a bear flag and see risk for break of the 7.1285 low to further extend losses from the Sep high to retrace gains from the January low. Break w
November 22, 2023 12:56 PM UTC
The CNY recent rally against the USD is largely driven by the softer tone of the USD across the board. However, interest rate differentials will likely remain at current wides until Q3 2024 and will then only narrow slowly. Meanwhile, foreign investors continue to liquidate China assets on conce
November 16, 2023 8:44 AM UTC
The Continuum Economics research team has spent much of the last month researching, reviewing and debating our long-term GDP, CPI inflation and central bank policy rate forecasts for 2025-30. Alongside a reassessment of long-term factors such as productivity and demographics, we have examined the la
November 15, 2023 8:51 AM UTC
Figure 1: China Economic Surprise Index
Source: Datastream/Citibank
October data from China shows a mixed picture. Yr/Yr Industrial production and retail sales were slightly stronger than expected at 4.6% and 7.6% respectively. However, on the month industrial production grew 0.4% and retail sales a m
November 13, 2023 8:15 AM UTC
Concerns about long-term growth in China into the 2nd half of the decade are increasing, which is a concern for global growth given China's contribution to global GDP over the past 20 years.
Figure 1: China GDP Growth Forecasts to 2030 (%)
Source: Continuum Economics
China's Long-Term Growth Problem
November 9, 2023 7:30 AM UTC
Figure 1: China Headline and Core CPI inflation
Source: Datastream
Pork prices helped to drag the headline inflation down, as excess pig production continues to be evident in the farming sector. Core CPI inflation at 0.6% remains a better indication of the underlying inflation momentum, which arg
November 1, 2023 10:01 AM UTC
The huge buzz around artificial intelligence has also raised a debate about the growth, jobs and inflation impact of this latest phase of the 4th industrial revolution (5G, AI, Internet of Things and Big Data)? What is the likely medium-term impact?
Figure 1: Survey of Impact on Global GDP Per Annu
October 30, 2023 8:18 AM UTC
With the Taiwan election in January expected to re-elect the anti-China DPP, and the U.S. focused on Ukraine and Middle East, how will the Taiwan situation develop before and after the election and in the coming years?
Figure 1: Taiwan Scenarios for the Next 5 Years
Source: Continuum Economics
Mo
October 25, 2023 10:50 AM UTC
Figure 1: China Primary and Overall Budget Deficit/GDP (%)
Source: IMF/Continuum Economics
The Yuan1trn increase in the 2023 budget deficit is to be channelled to increased local government spending on infrastructure including disaster reconstruction and prevention. Though officially the target is
October 18, 2023 7:18 AM UTC
Figure 1: China GDP Yr/Yr (%)
Source: Datastream/Continuum Economics
The Q3 quarterly change at 1.3% is better than the 0.9% rise expected and keeps the Yr/Yr rate from falling too far (Figure 1). With Q4 2022 having been mixed, even a weak Q4 quarterly change should now ensure that the authorities
October 16, 2023 2:15 PM UTC
Climate economists and policymakers traditionally think about climate change issues out to 2050, but what are the macroeconomic impacts out to 2025-30 from investment plans and also the climate events that are already happening?
Figure 1: Implications of Net Zero Policy Packages on Debt, Relative to
October 13, 2023 7:53 AM UTC
Figure 1: China Headline and Core CPI (%)
Source: Datastream/Continuum Economics
Fiscal Policy Stimulus
The September headline CPI came in lower than expected at zero Yr/Yr, as food prices dragged on the index – food supplies were plentiful ahead of golden week. The core inflation rate remai
October 11, 2023 9:37 AM UTC
Between May 2022 and April 2023, the RBI had aggressively increased the repo rate by 250 basis points in response to various economic challenges. However, this time around, as seen since May, the committee has chosen not to proceed with another hike, indicating a pause in its tightening policy. The
September 26, 2023 10:08 AM UTC
Our Forecasts
Source: Continuum Economics
Policy Stimulus Insufficient to Stop Slowing
Our GDP forecast looks for a slowing to 4.0% in 2024 from 4.8% in 2023 for a number of reasons.
Figure 1: Cumulative YTD Million Square Meters Residential Real Estate Development Versus Investment in Real Estate De
September 19, 2023 6:42 AM UTC
The spring U.S. regional banking crisis and Credit Sussie saga have prompted stress tests and reviews from regulators around the world with no sustained crisis in the banking system. Will bank stability remain on the backburner as a macro and market issue?
Figure 1: Global Systemically Important Ba
September 15, 2023 6:40 AM UTC
Figure 1: Residential Property Investment YTD (%)
Source: Datastream/Continuum Economics
August Data Some Stability, But
The good news is that August retail sales (4.6% Yr/Yr v 3.0% expected) and industrial production (4.5% Yr/Yr v 3.9% expected) were better than expected and show stabilisation i