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    Next Week in Asia

    Published On: 17 September 2021

    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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    76th Session of UN General Assembly commences

    US President Joe Biden will deliver his first speech at the United Nations General Assembly since taking office on 21 September. Of particular interest will be comments in relation to the US-China relationship following the announcement of a new trilateral security partnership by the US, the UK and Australia. Similarly, reports around the Leaders’ Summit of the Quadrilateral Framework (Quad), hosted by President Biden in Washington on 24 September, will be worth watching given recent tensions in the South China Sea. Biden will meet with Indian Prime Minister Modi, Australian Prime Minister Morrison and Japanese Prime Minister Suga to review progress made since their first virtual Summit on 12 March this year, and will discuss key issues of shared interest. Modi will also address the UN on the morning of 25 September.


    Asia’s central bank policy in view as COVID-19 spreads

    Government spending and health policy have been core policy tools during the COVID-19 crisis. In Asia in particular, proactive monetary policy remains essential. Monetary tools, funding facilities and targeted programmes to support multiple segments of each economy have been key. Next week’s monetary policy decisions in Indonesia, the Philippines and in Japan will be worth watching given intermittent weakness in the economic data. The policy tone remains one of accommodation – along with a willingness to do more. Bank of Japan (BOJ) Governor Kuroda has said that the BOJ will further relax monetary policy if necessary. Indonesia’s central bank repeated a pledge to keep its policy rate low until there are signs of rising price pressures. Next week, policymakers in the Philippines should take more aggressive monetary policy action: although there are some signs of stabilisation, the economy has seen its deepest contraction since the Second World War.


    Taiwan economy to continue to show resilience

    Next week’s economic reports from Taiwan are likely to point to a picture of resilience amid geopolitical tensions. Tensions between Taipei and Beijing are likely to continue. Taiwan’s military recently carried out aircraft exercises as a part of its annual drills, reportedly to prepare in the event of an attack by Chinese forces. This follows a pledge from President Tsai Ing-wen to modernise Taiwan’s military. Taiwan’s economy continues to show resilience despite these geopolitical tensions. Fitch ratings agency upgraded its outlook and expects Taiwan’s economy to grow by an annual six per cent in 2021, one of the highest growth rates in the region to be underpinned by export and manufacturing growth. The notable weak spot – which could prove to be a growing risk – is its retail sector. Upcoming retail sales data (and Taiwan’s industrial production report) could show weakness owing to the continued spread of COVID-19. As of 14 September 2021, only about 4.5 per cent of the population have been fully vaccinated.


    New push to boost Israel-Gulf trade ties following Abraham Accords anniversary

    Israel’s monthly trade report will be released next week, just as signatories to the Abraham Accords renew their focus on expanding trade and investment ties. Israel’s monthly exports have been resilient thus far in 2021, but it wants to encourage further growth by accessing new markets such as the UAE and Bahrain. Figures from Israel’s Central Bureau of Statistics show Israel-UAE trade has surged from US$50.8 million between January and July 2020 to US$613.9 million over the same period in 2021, with Israeli exports accounting for US$210 million of the latter figure. Israel expects UAE-Israel trade to reach US$1 billion by the end of 2021 and US$3 billion within three years, and has announced a trade delegation of 250 businessmen and entrepreneurs will travel to the UAE next month to encourage trade. Israel-Bahrain bilateral trade has not taken off in the same way, amounting to just US$300k this year. But the upcoming start of twice-weekly Gulf Air flights between Israel and Bahrain in October could change this.


    Turkey government debt data and interest rate decision could point to difficult economic recovery for the region

    Turkey’s government debt could increase further when new data is released next week. Recent World Bank figures highlight rising debt throughout the region, with public debt for MENA countries expected to rise eight percentage points from 46 per cent of GDP in 2019 to 54 per cent of GDP in 2021. Turkey’s growing government debt is consistent with this trend and is undermining investor sentiment and its economic recovery. Next week will also see Turkey’s central bank make a decision on interest rates, with investors speculating a rate cut could be forthcoming following a speech by Central Bank Governor Sahap Kavcioglu where he talked up the importance of core inflation indicators. Focussing on core price inflation would allow Governor Sahap Kavcioglu to honour his pledge to keep interest rates above inflation, but would likely unsettle financial markets. The lira fell against the US dollar following Kavcioglu’s speech. Any surprises in the debt figures or in the central bank announcement will spark financial market volatility. This is important to watch out for as financial developments in Turkey tend to be a bellwether for other emerging markets and could trigger spillover.