Asian economies back at pre-pandemic levels but scars remain

Asian economies back at pre-pandemic levels but scars remain

• Most Asian economies have regained their pre-pandemic GDP levels, but substantial gaps remain relative to pre-pandemic growth trajectories.
• Richer economies experienced a smaller gap due to policy and structural advantages. Emerging economies reliant on tourism and commodities face more risks.
• Long-run scars may manifest via diminished labour market, human capital, and investment prospects. Post-COVID turbulence makes things worse. With a more turbulent global environment risking a higher occurrence of economic shocks, resilience-enhancing reforms are a top priority for Asian policymakers.

Silicon valley bank a stern reminder but no cause for panic in asia

• The failure of the US-based Silicon Valley Bank is unlikely to degenerate into a major financial crisis.
• Asian markets are set, though, to continue suffering asset price corrections and currency depreciations in the near term.
• Nevertheless, the metrics of Asian resilience such as strong bank capitalisation and external accounts will ensure that these spillovers will be limited in scale and duration.

Regional Updates

• President Xi began his third term by reminding China and the world who is in charge. He is signalling a hawkish stance in economic, foreign, and defence policy.
• Taiwan’s exports continued to contract as tech-related exports languished amid slowing demand. Inflation eased after prior setbacks.
• Malaysia’s central bank kept its benchmark rate unchanged, citing the need to assess the impact of prior tightening. We maintain our view that further rate changes are unlikely.
• Former Malaysian premier Muhyiddin Yassin has been charged with corruption. The trials in the courts of law and public opinion will generate political uncertainty.
•  The Philippines continues facing stubborn inflation, with risks that inflation expectations are being baked into price dynamics. More aggressive tightening is likely.

Read more: CAA-Weekly-13-march-2023.pdf