Economic Snapshot for East & South Asia

December 13, 2019

East Asian economies set to lose momentum in 2020

East Asian economic growth is expected to slow in 2020 for the second consecutive year, as the export-driven economies face U.S.-China trade policy uncertainty and subdued global growth. Robust private consumption and looser fiscal and monetary policies, however, should cushion the slowdown.

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 3.9% in November from 3.3% in October, mostly reflecting the outbreak of African swine fever in China. Next year, inflation is expected to average at an unchanged rate compared to this year as slower economic growth is seen capping demand-pull price pressures.

The People’s Bank of China cut interest rates in November to buttress flagging economic growth. Meanwhile, the Bank of Korea left its base rate at 1.25% in the same month, after cutting it in October due to modest inflation and growing external headwinds. Next year, rates in East Asia are seen reducing very slightly.

Most currencies in the East Asia region depreciated against the USD in recent weeks on the back of less optimism surrounding 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 5.2% in October, up from 4.7% in September, as prices pressures intensified in all of the countries in South Asia but Pakistan. Next year, regional inflation is expected to pick up, partly on faster economic growth, although low oil prices will cap price pressures.

The central banks of India, Pakistan and Sri Lanka all decided to leave interest rates unchanged in November and December at their respective monetary policy meetings. While most analysts had expected India’s Central Bank to cut rates, higher-than-expected inflation led it to stand pat. Next year, the average regional interest rate is seen largely stable.