- Bank Indonesia surprised the thin consensus for a hold yesterday with its fourth 25bp rate reduction…
- …We continue to see an end-2025 rate of 4.75%, especially given BI’s rising anxiety over loan growth.
- Indian net exports were grim in Q2, even with US front-loading, but this won’t be seen year-over-year.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- In one line: Surprise, surprise… at least two more 25bp cuts to come by year-end.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- India’s two main inflation gauges were very soft in June, with food prices now deflating at all levels…
- …Food deflation at the retail level will likely persist until the end of 2025, due in part to base effects.
- We have downgraded our average CPI forecasts for this year and next to 2.5% and 4.9%, respectively.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- In one line: Outright food deflation is here, as predicted.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Malaysia’s retail sales are still weak; sales volumes registered no month-to-month increase in May.
- Real wage growth has been stagnant since the pandemic, weighing on disposable incomes.
- Q2 GDP will get no lift from consumption, but the recent rate cut could help Q3
Meekita Gupta (Asia Economost)Emerging Asia
- In one line: Modest, on-and-off deflation looks set to be the theme for H2.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Front-loaded exports from EM Asia will start to correct in H2, even if US “reciprocal” tariffs soften.
- A few economies are much less exposed, though; we note a couple of sector-specific upside risks.
- Longer term, we maintain that EM Asia exports will have a brighter future, supporting their markets.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
Indonesian sales remain tepid, at best… stimulus ‘pop’ looking small
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- The BNM made its first rate cut in five years, reducing the overnight policy rate to 2.75% from 3.00%.
- The Bank is clearly prioritising weak consumption and exports above the risk of re-sparking inflation.
- Indonesian retail sales remain subpar in spite of the May bounce; no early signs of a stimulus boost.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Another month of exports above 30% in Taiwan, as they fail to moderate despite our expectation.
- This will be good news for Q2 GDP year-over-year, which is highly correlated with exports.
- Food and housing costs are finally down consistently, helping to keep inflation below 2%.
Meekita Gupta (Asia Economost)Emerging Asia
- GDP growth in Vietnam jumped to 8.0% in Q2 from 7.1% in Q1, comfortably outstripping all forecasts…
- …But brisk export front-loading to the US will unwind shortly, especially with a ‘deal’ now in place.
- We have raised our 2025 GDP forecast to 6.9%, implying an H2 slowdown to an average of 6.4%.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
A few more months of modest Thai deflation on the cards
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
Philippine inflation still comfortably below the BSP’s range
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Thai household debt has shrunk for the first time in over 20 years, but its ratio to GDP is still very high…
- …Consumer NPLs resumed their rise in Q1 after a Q4 stall; bad initial news for “You Fight, We Help”.
- Philippine inflation inched up in June; the low-CPI environment is yet to lift confidence meaningfully.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
Post-export-front-loading clouds for ASEAN continue to darken
Indonesian export growth probably will buckle again in Q3
Expect a further rise in Indonesian food inflation in the July report
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- ASEAN’s manufacturing PMI deteriorated further in June, and all signs point to more near-term falls.
- Indonesian export growth is in for a rockier H2, in spite of evidence of stabilising demand from China.
- Consumer sectors were to blame for India’s poor May IP; that’s a double whammy for the economy.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- In one line: Consumer-facing industries are buckling.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
