Singapore’s Budget: Expect medium-term adjustments to raise inflation Thailand: A good chance of upside surprise in 2022

Highlights from the CAA Weekly Table:

Asian economic prospects

  • China’s policy makers are stepping up stimulus efforts, with measures focused on helping small firms. However, they remain unwilling to mount an aggressive response and continue to toughen regulation of private enterprise, which hurt business confidence.
  • Indian inflation is a worry despite the central bank’s views to the contrary. In Indonesia, there is potential for an upside surprise in economic growth, with consumers stepping up their spending. Risks to Hong Kong’s growth are clearly to the downside. In the Philippines, the conditions for an acceleration in growth are falling into place.

Singapore’s Budget: Expect medium-term adjustments to raise inflation

  • The budget signalled a shift in the government’s priorities from cushioning the economy against COVID-19 to addressing longer-term imperatives such as enhancing productivity in local firms, upskilling the local labour force, and Singapore’s nascent green transition.
  • The slightly negative fiscal impulse notwithstanding, the meaningful step up in direct transfers to households to offset cost-of-living increases and a concerted effort to raise low wage incomes could produce a near-term jolt to domestic demand.
  • On the revenue front, policymakers have introduced several adjustments to their tax policies in light of rising structural expenditures on healthcare and social needs. The mooted GST hike will be pushed out further out and implemented in a more gradual manner.
  • This, alongside a) incrementally tighter controls on foreign worker inflows and b) an ambitious carbon tax hike that brings Singapore close to parity vis-a-vis large, developed countries as soon as 2030 should imply moderately higher medium-term inflationary pressures. This could lead to additional pre-emptive monetary policy tightening this year.

Thailand: A good chance of upside surprise in 2022

  • Thailand’s economic performance has been disappointing in recent years, but there are now signs that the economy is turning around and could even deliver an upside surprise.
  • The authorities are determined to put the pandemic behind them. This paves the way for recovery and subsequent growth on multiple fronts in 2022.
  • We estimate GDP growth at 4.7% in 2022, with the chance of an upside surprise if foreign tourist arrivals reach past the projected 5.6 million tourists to 10 million tourists.
  • The upside scenario for tourist arrivals is achievable as Thailand pushes for travel bubbles with its traditional markets for tourism and as pent-up demand for travel persists.
  • Global demand conditions and revved up government spending render the manufacturing and construction sector bright spots for the economy in 2022.
  • Crucially, the revival of tourism will lift the Thai Baht from its prolonged weakness throughout the duration of the pandemic.Appendix: Centennial’s Updated Forecasts

    Year

    Growth

    (%)

    Inflation

    (%)

    Current Account (% of GDP)

    Policy rate (%)

    Currency (vs USD)

    China

    2020

    2.3

    2.5

    1.9

    2.25

    6.53

    2021

    7.8

    1.4

    2.4

    2.25

    6.45

    2022

    5.5

    2.0

    1.3

    2.25

    6.55

    India

    2020

    -7.3

    5.5

    0.9

    4.00

    73.1

    2021

    9.2

    5.3

    -1.0

    4.00

    75.0

    2022

    7.0

    5.2

    -2.0

    4.40

    74.5

    Indonesia

    2020

    -2.1

    1.7

    -0.4

    3.75

    14,050

    2021

    3.7

    2.0

    0.3

    3.50

    14,300

    2022

    5.5

    3.5

    -1.0

    4.00

    14,000

    Korea

    2020

    -0.9

    0.5

    4.6

    0.50

    1,085

    2021

    4.0

    4.0

    5.0

    1.00

    1,180

    2022

    2.9

    3.1

    3.9

    1.75

    1,150

    Taiwan

    2020

    3.1

    -0.2

    14.1

    1.125

    28.0

    2021

    6.1

    3.0

    14.6

    1.125

    27.5

    2022

    3.8

    2.2

    13.8

    1.15

    27.0

    Hong Kong

    2020

    -6.1

    0.3

    6.5

    7.75

    2021

    6.2

    1.6

    4.0

    7.75

    2022

    4.0

    1.9

    3.5

    7.75

    Singapore

    2020

    -5.4

    -0.2

    17.6

    1.33

    2021

    7.1

    1.9

    22.0

    1.32

    2022

    4.5

    1.5

    17.2

    1.27

    Malaysia

    2020

    -5.6

    -1.4

    4.2

    1.75

    4.02

    2021

    3.1

    2.5

    4.0

    1.75

    4.20

    2022

    6.0

    2.6

    3.2

    2.25

    4.10

    Philippines

    2020

    -9.6

    3.5

    3.1

    2.00

    48.0

    2021

    5.6

    4.4

    -1.2

    2.00

    50.5

    2022

    6.5

    3.8

    -1.8

    2.50

    50.8

    Thailand

    2020

    -6.1

    -0.8

    3.5

    0.50

    30.0

    2021

    1.0

    1.5

    0.3

    0.50

    33.0

    2022

    3.5

    2.4

    1.3

    0.75

    32.5

    Vietnam

    2020

    2.8

    3.2

    3.7

    4.00

    23,080

    2021

    3.0

    2.5

    2.2

    4.00

    23,300

    2022

    7.0

    3.5

    2.5

    4.50

    23,050

    Source: Centennial Asia Advisors. Forecasts for India are on the basis of the fiscal year ending March. Figures in parentheses refer to previous forecast. Figures in red indicate a downgrade; green signal an upgrade.

     

21-Feb-2022