East & South Asia Economic Forecast

Economic Snapshot for East & South Asia

November 13, 2019

East Asian economies are expected to decelerate in 2020

The East Asian economy is seen further decelerating next year as export-driven economies continue to face headwinds from China-U.S. trade tensions, which are weighing on global economic activity. More supportive fiscal and monetary policies should, however, support growth.

South Asia economic growth to pick up in 2020

South Asian economic growth is expected to pick up in 2020. This is primarily due to a stronger projection for India, where the government is pursuing more pro-growth policies such as corporate tax reductions. Sri Lanka’s economy should also pick up steam next year after a tough 2019, whereas economic growth in Bangladesh and Pakistan is expected to slow.

East Asia Monetary & Financial Sector News

Inflation in East Asia accelerated to 3.3% in October from 2.6% in September, mostly reflecting the outbreak of African swine fever in China. Next year, inflation is expected to average at a broadly unchanged rate from this year as slowing economic growth in the region is seen capping demand-pull price pressures.

The Bank of Korea cut its base rate to 1.25% from 1.50% on 16 October, due to tame inflation and growing external headwinds. Also, the Hong Kong Monetary Authority cut its base rate by 25 basis points to 2.00% on 31 October, hot on the heels of the U.S. Federal Reserve’s latest cut, while China cut its medium-term lending facility by 5 basis points.

Most currencies in the East Asia region appreciated against the USD in recent weeks on the back of optimism linked to the U.S.-China trade talks. Looking ahead, most regional currencies are expected to remain broadly unchanged against the USD by the end of next year compared to the end of this year.

South Asia Monetary & Financial Sector News

Regional inflation accelerated to 4.7% in September from 4.0% in August, as prices pressures intensified in all of the countries in South Asia but Bangladesh. Turning to 2020, regional inflation is expected to accelerate, partly on faster economic growth, although low oil prices will cap price pressures.

There were few monetary policy developments in Bangladesh, India, Pakistan or Sri Lanka over the past month, although attention is turning to the Reserve Bank of India, which is widely expected to cut rates at its 3–5 December monetary policy meeting to support economic growth. The average regional interest rate is expected to be largely stable next year.

Currencies in the South Asia region were largely unchanged over the past four weeks against the U.S. dollar. Next year, regional currencies are seen depreciating against the greenback, partly on higher inflation and persistent twin deficits.


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East & South Asia Economic News

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