The Philippines’ stronger-than- expected Q1 was due mainly to the likely last hurrah in consumption.
Q2 will be a wake-up call, as the election slams the brakes on government spending and investment.
We're happy to stay below-consensus on growth, but we have raised our 2022 forecast to 5.6%.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
Thai exports end Q1 solidly, keeping the recovery chugging, despite a naturally soft start to 2022.
Remittances in the Philippines continue to lose momentum, with growth driven narrowly by the U.S.
The continued recovery in business sentiment in Vietnam suggests upside risks to Q2 GDP growth.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- CPI inflation in India returned to the 6% upper bound of the RBI's target range in January...
- ...Food remains the main culprit and, unfortunately for the MPC, base effects are only part of the issue.
- Petrol prices look poised for a big jump from March, and core pressures remain uncomfortably sticky.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- BI is becoming more worried about imminent Fed hikes, but currency stability looks secure...
- ...The IDR is close to fair value, foreigners hold only a small share of bonds, and FX reserves are ample.
- We'll be upgrading our Q4 growth forecast for India, but the IP data broadly show an end-year stall.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- The RBI defied the consensus for the start of some normalisation; its worries over inflation are fading.
- Don't count on food prices cooperating with the MPC's forecasts, which look overly optimistic.
- The only way forward for already-stubborn core inflation is up, jarring with the MPC's nonchalance.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- We continue to believe that the BoT will normalise policy this year, potentially as early as June.
- The high level of household debt eventually will steal the Bank's attention, as will above-target inflation...
- ...Which looks set to last longer than the MPC expects; price pressures are broadening out.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Indonesia's Q4 GDP beat expectations, but statistical noise flattered the quarterly picture.
- The front-loading of spending ahead of the April VAT hike probably will override any Omicron hit.
- Investment is set for a bumper year ahead, with a likely soft landing in export growth posing no threat.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Major crosscurrents will keep ASEAN inflation from swinging wildly—in either direction—this year...
- ...Non-core imported disinflation will butt heads with pandemic-era supply issues yet to be resolved.
- Government policies—both past, present and future—will differentiate trajectories in inflation.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- We’re holding onto our view that the RBI will start to normalise policy next week, with a 25bp rate hike.
- The January data are all singing from the same hymn sheet; Omicron's direct economic hit is trivial.
- The market has been pricing in a hike for months, with the repo-OIS now spread hitting a key level.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- GDP growth in the Philippines surprised to the upside in Q4, though the headlines are misleading.
- Disconcertingly, capex is stalling well below the pre-Covid level; election uncertainties won't help.
- Consumption was solid and Omicron is unlikely to register in Q1, but watch the slowing vax rate.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Expect a spike in Vietnam's YTD retail sales growth print for January, thanks to the December leap.
- The mobility data have yet to show any Delta 2.0 or Omicron anxieties, keeping catch-up growth intact.
- The trade surplus likely leapt to a 17-month high, as volatile Tet effects take over in the short run.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- India's official and unofficial data for Q4 paint markedly different pictures; the latter give hope...
- ...But we are unconvinced, on balance, and will keep to our below-consensus 2.4% GDP growth forecast.
- Merchandise and services trade in Thailand entered 2022 with solid momentum; expect the same in Q1.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Bank Indonesia is more than ready to unwind Covid support, looking at the full reversal of RRR cuts...
- ...But rate hikes are unlikely until mid-year, in spite of BI's hawkish view on the Fed; thank Omicron.
- Loan growth will surpass BI's 2022 forecast soon, and inflation is unlikely to stay a non-issue for long.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Vietnam's fiscal stimulus for 2022 likely means just a less painful budget consolidation.
- The VAT cut will have a real impact, but the post- Covid priority probably is to manage the debt level.
- India's December price data were softer than expected, but the underlying trends remain hot.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- The vertical rise in Covid numbers indicates that Omicron has taken full hold in the Philippines...
- ...But it's too soon to say if it will dent net sales; the outbreaks in 2021 were largely a non-factor.
- Catch-up growth should end this quarter, and the outlook beyond this remains uninspiring
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- The beginnings of an Omicron wave are now visible in India, forcing the reintroduction of soft curbs.
- A repeat of the huge Delta hit to the economy is unlikely, but India is more at risk than most EMs.
- The PMI data for Q4 were solid, but they are now rolling over and look poised for more downside.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- Vietnam staged a successful V-shaped recovery in Q4, with GDP more than reversing the first Delta hit.
- Household spending was punchy, and Omicron is unlikely to derail the release of pent-up demand.
- Exports look poised for a fast start to 2022; we have raised our full-year GDP growth forecast to 8.0%.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- BI's "pro-stability" mantra for 2022 implies that it'll also act if things get too hot; watch credit growth.
- A prolonged pause would be pro-cyclical and risk IDR stability; we still see two 25bp rate hikes in H2.
- Retail sales growth is back in the black, and the surge in confidence implies this is no one-off.
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
