East & South Asia Economic Forecast

Economic Snapshot for East & South Asia

March 25, 2020

East Asian economic growth is expected to slump in 2020

East Asian economic growth is expected to slump in 2020, marking the third consecutive year of slowing growth, as the coronavirus pandemic restricts activity across the region and hits export prospects. On the plus side, supportive fiscal and monetary policies should cushion the slowdown somewhat.

South Asia economic growth to stagnate in 2020

Economic growth is expected to stagnate in South Asia this year as the spread of coronavirus and the consequent government measures restricting domestic and international travel will curtail activity. Moreover, export prospects have diminished. However, supportive fiscal and monetary policies should soften the blow.

East Asia Monetary & Financial Sector News

Regional inflation slowed to 4.6% in February from 4.8% in January, mostly due to weaker price pressures in China, Korea and Taiwan, likely as coronavirus-related restrictions hit demand. This year, average regional inflation is seen accelerating slightly compared to last year due to higher inflation in China.

Central banks of all East Asian countries responded in recent weeks to the coronavirus pandemic, with those of Hong Kong, Korea, Mongolia and Taiwan cutting interest rates and the People’s Bank of China slashing its reserve requirement ratio. On average this year, rates in East Asia are expected to be lower compared to last year as central banks attempt to rekindle growth.

Most regional currencies weakened against the U.S. dollar in recent weeks as the fallout from the coronavirus pandemic intensified. Looking ahead, most East Asian currencies are seen depreciating this year compared to last year due to slower growth and looser monetary policy.

South Asia Monetary & Financial Sector News

Inflation decelerated sharply to 6.9% in February from 7.9% in January, as price increases slowed in all regional countries barring Sri Lanka. This year, inflation is projected to average lower compared to last year, as subdued oil prices and downside risks to demand due to coronavirus weigh on price pressures.

The central banks of Pakistan and Sri Lanka both cut interest rates in recent weeks, as the scale of the economic threat posed by coronavirus became clearer. The Reserve Bank of India, meanwhile, underlined its commitment to mitigating the effects of the pandemic. Overall, monetary policy in the region is seen loosening this year compared to last year.

Most currencies in South Asia weakened against the U.S. dollar in recent weeks on increased risk aversion among global investors. This year, the outlook is clouded by coronavirus uncertainty and most currencies are seen depreciating against the dollar, except the Indian rupee.

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East & South Asia Economic News

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