Credit Suisse expected the already low inflation in Asian countries to allow some central banks to ease policy ahead of the Fed.
Growing economic data for Western countries are pressuring central banks to keep their policy rates higher for longer. The stall in disinflation in the US as well as the rise of core inflation in Europe suggest that growth for Western major economics is too strong. Credit Suisse noted that major central banks need weak, sub-potential growth, not sustained above-trend growth in the US and an acceleration in the euro area.
Amid tight labour markets and robust wage growth, Credit Suisse believed that major central banks will not cut rates this year, expecting the Fed to begin cutting in late 1Q24.
On the other hand, Credit Suisse had a different view for Asian markets, led by China. The relocation of some of China’s manufacturing should benefit other markets in Asia, especially Vietnam and small positive effects on India. China’s outbound tourism would boost selected Asian economies most.
Still, growth is expected to slow in the second half of this year with more constrained fiscal policy than in the past. The Swiss bank believed the residential real estate sector will stagnate after a small, near-term bounce of highly depressed levels.
Moreover, slowing growth in the US and Europe will also weigh on Asian growth by constraining export growth, Credit Suisse reported while pointing out that outbound shipments in China and Vietnam have disappointed so far this year. Export and manufacturing momentum is likely to weaken in the coming quarters.
Nevertheless, Credit Suisse noted that due to the fact that Asian inflation is contained in most economies, the bank did not expect further policy tightening by central banks and some countries such as China, Thailand and Vietnam may ease their policy.
The Swiss bank projected that emerging markets will post a 3.5% economic growth this year and 3.8% in 2024. However, inflation would remain high at 6.6% in 2023 and 5.0% in the year that follows.
In the meantime, the firm expected Thailand to show 3.6% GDP growth this year and 3.8% in 2024. Inflation is expected to hang around the central bank’s 1-3% target range at 2.8% in 2023, but will fall to 1.9% in 2024. That would be the second lowest rate among non-Japan Asian countries behind Taiwan and ties with South Korea.
Yesterday, the headline Consumer Price Index (CPI) in Thailand increased 2.83% in March from the same month a year ago, which was lower than the 3.30% increase that was predicted in a Reuters poll. The core CPI index rose 1.75% from a year ago in March, compared to the expected growth of 1.82%.
For the first time in 15 months, headline inflation fell back within the central bank’s 1% to 3% target range.
