Asia week ahead: Four central bank meetings
Next week in Asia is packed with central bank meetings and third quarter GDP releases. Is there anything more that central banks can do to accelerate the recovery? We don’t think so. Not for the ones meeting next week, at least
Central bank meetings
Central banks of China, Indonesia, Philippines and Thailand are set to review their interest rate policies next week. All are likely to pass as non-events.
The People's Bank of China last changed its key lending rates in April when it cut the 1-year Prime Lending Rate by 20 basis point to 3.85% and 5-year PLR by 10bps to 4.65%. We think it will view these levels as accommodative enough for economic recovery going forward.
The lowest inflation in the last two decades and negative GDP growth make an argument for further easing by Bank Indonesia. Substantiating this argument is currency strength following the Covid-19 vaccine euphoria recently. However, BI is likely to see through these factors and leave rate policy on hold.
We also expect the Bangko Sentral ng Pilipinas, Philippines central bank, to keep its powder dry. The BSP paused easing after a 25bps policy rate cut to 2.25% in June. As inflation has crept up in recent months -- 2.5% in October, it has nudged the real policy rate into negative territory. But the data earlier this week, showing an 11.5% YoY GDP plunge in 3Q, is still the worst in Asia and tips the balance of risk for a BSP rate cut.
At 0.5% currently, the Bank of Thailand's policy rate is one of the lowest in Asia. Hopes for the Thai economy’s recovery rest on the revival of tourism rather than any additional macro-policy support. Unfortunately, those hopes too are misplaced in an unabating global pandemic.
Third quarter GDP releases
Japan, Singapore and Thailand will report 3Q GDP growth. A big quarter-on-quarter GDP bounce seems to be in order everywhere after a record 2Q crash induced by Covid-19 lockdowns. However, that still won’t be sufficient to pull year-on-year GDP growth back into positive territory in any of these economies.
Thailand continued to be an Asian underperformer in terms of GDP growth in 3Q as tourism, the main driver of that economy, was still missing in action. Singapore was an outperformer, with the second print of 3Q GDP likely to get a further upward boost from strong manufacturing growth in September. Japan is somewhere in the middle, with weak investment spending holding back the recovery.
Where in the fourth quarter?
A slew of October data from around the region will provide a glimpse into where Asian economies are headed in the final quarter of the year.
China’s industrial production growth should see some softening in October due to the National Day holiday, while retail sales should get an extra boost for the same reason. Hong Kong SAR is likely to see deeper negative CPI inflation as unemployment continued to grind higher.
Taiwan’s export order growth for October will serve as a leading indicator for the rest of Asia’s exports, as the electronics-led export recovery has gained momentum lately. October exports figures from Japan and Singapore will also be under scrutiny for the same reason.
Finally, Australia’s labour report should reinforce an increase in activity amidst an improved Covid-19 situation.
Asia Economic Calendar
Download
Download article
13 November 2020
Our view on next week’s key events This bundle contains 3 articles"THINK Outside" is a collection of specially commissioned content from third-party sources, such as economic think-tanks and academic institutions, that ING deems reliable and from non-research departments within ING. ING Bank N.V. ("ING") uses these sources to expand the range of opinions you can find on the THINK website. Some of these sources are not the property of or managed by ING, and therefore ING cannot always guarantee the correctness, completeness, actuality and quality of such sources, nor the availability at any given time of the data and information provided, and ING cannot accept any liability in this respect, insofar as this is permissible pursuant to the applicable laws and regulations.
This publication does not necessarily reflect the ING house view. This publication has been prepared solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved.
ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam).