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    Next Week in Asia

    Published On: 19 May 2022

    Next Week in Asia is the Asia House 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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    Multi-stakeholder approach at WEF key to avoiding double-dip in global growth

    The World Economic Forum (WEF) annual meeting will be held in Davos, Switzerland, from 22 to 26 May. The gathering’s theme of ‘History at a Turning Point’ is an apt one as policymakers, the private sector and consumers face multiple economic shocks. At a time of heightened and persistent geopolitical tensions, war, climate change and the food crisis, improving and repairing bilateral economic ties is essential. Inevitably, global economic and financial cooperation, the post-COVID economic recovery, climate action, technological innovation, global health and energy shocks will be of particular focus in the discussions. The global economy is at the cusp of a ‘double-dip’ in its growth outlook in light of multiple shocks. Discussions held at WEF should be geared towards forming a multi-stakeholder approach. An example of this would be new initiatives geared to private-public partnerships and types of green blended finance initiatives to tackle financing gaps for sustainable development.

    The recent update of the Asia House economic readiness indices highlights ongoing developments in green finance and digitalisation initiatives in key Asian economies. Find out more.

    Asia’s central banks to tackle high inflation and weaker currencies

    As with most central banks, Asia’s face a difficult balancing act. Inflation is creeping higher amid intermittent weakness in growth. What’s more, exchange rate weakness may now prove problematic too, with the strength in the US dollar coming at the expense of a number of Asia’s currencies. In the week ahead, Bank Indonesia and the Bank of Korea will hold their monetary policy meetings. In Indonesia’s case, currency weakness has been exacerbated by the an on palm oil. As a consequence, although the bank is unlikely to change its policy rate, it is likely to continue to intervene in the foreign exchange market to defend its currency. Foreign exchange intervention is likely to become a broader theme in the region as inflation edges higher too. South Korea’s growth and inflation outlook is sufficiently robust that the Bank of Korea is likely to warrant further – and also larger – rate rises, as indicated by central bank governor Rhee Chang-yong. After inflation surged to an annual rate of 4.8 per cent in April, the newly appointed governor stated that inflation was of greater concern than slower growth.

    Australia’s Asia strategy in focus ahead of election

    Australia’s federal elections take place this weekend, with incumbent Prime Minister Scott Morrison running against Anthony Albanese, the current leader of the opposition Labor Party. Two core issues on the campaign trail – with direct implications for bilateral relations with Asia – have been national security and Australia’s relationship with China. Regional tensions have increased in recent years, with Australia’s administration supporting an inquiry into the origins of COVID-19, and China imposing tariffs on multiple Australian products. Most recently, concerns among Australian ministers arose after a security pact between China and the Solomon Islands was drafted. Relations between some ASEAN members and Australia have also been affected by the AUKUS nuclear-powered submarine deal in 2021, given ASEAN’s 1995 pledge to be a nuclear-weapon-free zone. Commenting on these developments as failures of Morrison’s tenure, Albanese has stated that he wants to ‘recraft the narrative’ on Australia’s relationship with Asia and has promised US$370 million in aid to the Pacific region in the next four years. Following the election, it is likely that Australia will look to update its outlook on Asia to strengthen its national security and economic ties.

    Oil price developments expected to boost Saudi Arabia’s trade surplus

    In the coming week, Saudi Arabia’s monthly trade statistics for March 2022 are likely to show a significant boost from recent oil price developments. The Kingdom’s monthly trade surplus rose to 60.1 billion Saudi Riyals (approximately US$16 billion) in February 2022 – the highest since December 2016. This figure could increase further when March’s data is released. OPEC’s monthly oil basket price averaged around US$113 in March compared to around US$94 in February. Notwithstanding oil price developments, Saudi Arabia has been consistently investing in expanding its non-oil sector. And yet, oil still remains a key revenue generator, making up 77.5 per cent of Saudi Arabia’s total exports in February 2022. While Saudi monthly oil exports fell by around one per cent in March, the price that Saudi Arabia is selling its oil at has been an offsetting factor. Asia is the main destination for Saudi Arabia’s oil and, in March, the Kingdom increased Arab Light crude prices for Asian customers by US$0.60 a barrel to a premium of US$2.80 above the Oman/Dubai average benchmark. Additionally, Saudi Arabia raised Asia Light crude prices for Asian customers to a record high in May, though has since lowered the price of June’s shipments to US$4.40 per barrel above the Oman/Dubai average benchmark.

    Asia House has published research exploring GCC trade dynamics ahead of forthcoming UK-GCC Free Trade negotiations. Read the briefing here.


    Abu Dhabi’s Electric Vehicle Innovation Summit commences

    Abu Dhabi’s inaugural Electric Vehicle Innovation Summit will take place between 23 and 25 May, convening regional business leaders within the Electric Vehicle (EV) sector. 2021 saw the UAE become the first GCC nation to introduce a net-zero carbon emissions target, pledging to achieve this target by 2050, and the country is keen to advance its sustainability agenda ahead of hosting COP28 in 2023. Building EV charging infrastructure and EV manufacturing capabilities, as well as encouraging consumers to buy EVs, will be key steps within the UAE’s energy transition. The UAE opened its first EV manufacturing facility in March 2022. The plant is expected to produce 55,000 vehicles a year and will be run by local company ‘M Glory,’ which will be present at the summit. The UAE has also made strategic investments overseas to develop EV and EV charging technology. For instance, the UAE’s renewable energy company, Masdar, which is a major partner of the summit, has invested £35 million into a £400 million UK government fund to develop Britain’s EV charging infrastructure. The UAE will also hope to position itself as a key supplier of EVs to other Gulf states. Saudi Arabia for example, is aiming for 30 per cent of Riyadh’s vehicles to be electric by 2030.

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