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    Next Week in Asia – 5 May 2022

    Published On: 5 May 2022

    Next Week in Asia is the Asia House weekly briefing on key trade, investment, and policy issues to watch across Asia in the week ahead, with analysis and views from our Research and Advisory team.

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    China’s inflation acceleration could gain further traction

    In the week ahead, China’s inflation report will garner attention, with an acceleration expected for the month of April. This could, in turn, be indicative of producer price pressures starting to have knock-on impacts for consumer price inflation in China. Additionally, if sustained, the depreciation in the renminbi exchange rate could also exacerbate domestic inflation pressures, if it marks the start of a new downtrend. The renminbi’s trade-weighted depreciation will be worth watching on this front. The continued economic fallout from the Russia-Ukraine crisis on fuel prices is still being felt, food prices are rising and supply chain disruptions from COVID-19 induced lockdowns worsened shortages in April. These factors are expected to drive inflation further in the middle months of the year. China’s broader growth prospects are being impacted by strict lockdowns across the country aimed at maintaining the government’s zero-COVID policy. Given this, the government may have to choose between the degree to which its zero-COVID policy is adhered to and the extent to which select portions of the economy are reopened to avoid a sharper slowdown.

    Economic reports will provide clearer view of India’s outlook

    India’s economic reports pertaining to inflation and industrial production growth for the months of April and March respectively will be released next week. India’s inflation outturns have been consistently higher than expected and have shown significant acceleration. This is likely to have continued in April. The economic backdrop has prompted the Reserve Bank of India (RBI) to raise interest rates at its recent monetary policy meeting. With fuel and food price inflation continuing to accelerate, the RBI policy move was seen as an attempt to curb inflation. The RBI now joins the growing number of central banks that have started to adjust their monetary policies. Despite the risks to India’s growth (and its inflation) outlook, it is expected to continue to be the fastest growing economy in 2022, according to the International Monetary Fund – notwithstanding the IMF’s recent downward revisions to all its country forecasts. India’s economy is likely to continue to be well underpinned. Our quarterly update of the Asia House Economic Readiness Indices for Green Finance and Digitalisation suggests that India needs to prioritise policy effort in both channelling green finance and promoting digitalisation. View the updated indices and find out more.

    Marcos Jr front-runner in Philippines presidential elections

    The Philippines’ presidential and vice presidential elections are scheduled to be held on 9 May. Ferdinand Marcos Jr, the son of former President Marcos, is the front-runner. Known affectionately as “Bongbong” by supporters, Marcos Jr will compete mainly with three other candidates, with the biggest competitor expected to be Leni Robredo, the former Vice President during Rodrigo Duterte’s tenure. According to polls held between 16 to 21 April, Bongbong has 56 per cent of the vote, while Robredo is in second place at 24 per cent. Marcos Jr is expected to follow similar policy lines to Duterte, whose daughter, Sara Duterte, is running for the vice presidency in alliance with Bongbong. Robredo has also been engaging in a widespread grassroots campaign, receiving endorsements from numerous politicians and organisations in the past months. While Robredo is expected to put up a strong fight, a 32-point gap will be a challenging deficit to overturn.

    Saudi Arabia to host its first ever Future Aviation Forum

    Saudi Arabia will host its inaugural Future Aviation Forum between 9-11 May in a bid to grow its tourism and aviation sectors. Attracting greater tourism to the Kingdom is a key component of its Vision 2030 economic diversification strategy. Saudi Arabia has developed new airports at the NEOM mega-project and heritage site, Al-Ula, and plans to introduce a new national airline carrier that will operate out of a new international airport in Riyadh. Current flag-carrier, Saudia, will reportedly shift to servicing religious tourists travelling in and out of Jeddah for Hajj and Umrah pilgrimages. As international travel recovers from the COVID-19 pandemic, Saudi Arabia’s General Authority of Civil Aviation (GACA), hopes the conference will help advance its own National Aviation Sector Strategy. This programme aims to triple annual passenger traffic from 109 million in 2019 to 330 million by 2030 and also increase air cargo from 900,000 tonnes in 2019 to 4.5 million tonnes by 2030. The forum is expected to attract 2,000 industry representatives.

    Saudi and UAE PMI data could signal continued confidence

    Purchasing managers’ indices (PMI) readings for April 2022 from Saudi Arabia and the UAE will be released on 9 May. PMI data from both countries has remained above 50 for over a year, signalling expansion in their respective manufacturing sectors. In Saudi Arabia, the PMI rose slightly from 56.2 to 56.8 between February and March 2022 on the back of rising orders and employment as the Kingdom’s economy continues to recover from the pandemic. Confidence may be buoyed by estimates released this week from Saudi Arabia’s General Authority for Statistics, which points to a 9.6 per cent increase in real GDP for Q1 2022, compared to the same period last year, representing the fastest growth rate in a decade. In the UAE, PMI data remained unchanged between February and March 2022, at 54.8. Input cost inflation continues to rise in both economies. According to Markit Economics, input price inflation in the UAE and Saudi Arabia rose to their fastest rate since November 2018 and August 2020 respectively. This week saw both countries’ central banks mirror the Federal Reserve’s 0.5 per cent rate hike, in a bid to stem inflation.

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