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Asian Insights
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Commodity prices set to fall back to earth in 2H22
- We summarise our expectations for the commodity prices that affect the region. Table 1 shows each country’s exposure to commodity prices as a share of GDP and exports.
China: is a perfect storm brewing?
- High frequency data for June showed some signs of improvement but the economy continues to struggle under multiple stresses. The present malaise goes beyond zero-Covid policies.
- The dangers are growing for the economy. Covid-19 restrictions are hurting consumer morale and undermining SMEs; local government finances are strained; real estate is under duress; and the economic slowdown is percolating into financial and social stresses.
- Stimulus measures will be stepped up to boost the recovery in 2H22, but strained government finances and policy constraints put the effectiveness of stimulus into question.
Asian Monetary Policy: On the cusp of more aggressive tightening
- The Fed’s aggressive tightening will spur regional central banks to tighten as well. Inflation is rising with the closing of output gaps, tightening labour markets, supply-side disruptions and elevated food and energy prices, as illustrated in the heatmap table below:
