Economic Snapshot for East & South Asia

April 29, 2020

East Asia economic growth is expected to slow significantly in 2020

Regional economic growth is expected to slow significantly in 2020, marking the third consecutive year of slowing growth, as the coronavirus crisis restricts activity across the region and hits export prospects. A key downside risk is strict lockdowns being extended deeper into the year. More positively, supportive fiscal and monetary policies should cushion the slowdown.

South Asia economic growth to stagnate in 2020

South Asian economic growth should slow significantly this year due to the spread of coronavirus and the related measures restricting regional and global activity. In particular, the economies of many countries in South Asia are reliant on exports and remittances, which are likely to suffer this year. More positively, expansionary fiscal and monetary policies should soften the blow.

East Asia Monetary & Financial Sector News

Regional inflation slowed to 3.8% in March from 4.6% in February, likely due to demand weakness and falling oil prices. This year, average regional inflation is seen moderating slightly compared to last year.

Central banks of East Asian countries continued to respond to the coronavirus crisis in recent weeks, with those of China and Mongolia cutting interest rates further. Moreover, the Bank of Korea launched an unprecedented version of QE. On average this year, rates in East Asia are expected to be lower compared to last year as central banks attempt to rekindle growth.

Many East Asian currencies stabilized against the U.S. dollar in recent weeks after weakening significantly in March due to the coronavirus crisis. Looking ahead, most regional currencies are seen depreciating this year compared to last year due to slower economic growth and looser monetary policy.

South Asia Monetary & Financial Sector News

Inflation decelerated sharply to 6.2% in March from 6.9% in February, likely due to weaker demand and lower oil prices. This year, inflation is projected to average lower compared to last year.

The central banks of Bangladesh, India, Pakistan and Sri Lanka all cut interest rates and announced other liquidity-enhancing measures in April to help mitigate the escalating costs of the coronavirus pandemic. Overall, monetary policy in the region is seen loosening this year compared to last year.

Most regional currencies stabilized against the U.S. dollar in recent weeks after weakening substantially in March due to the coronavirus crisis. Turning to the end of this year, most regional currencies are seen depreciating year-on-year against the USD.