Asia Monitor

Comprehensive country-by-country macroeconomic analysis, risk appraisals, latest market data and forecasts for Asia

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Key stories from this month's issue...

Currency Forecast - PGK: Weakness Ahead In Spite Of Recent Stability - JAN 2017

Australasia & South Pacific November 2016 / Papua New Guinea / Finance

We expect the Papua New Guinea kina to weaken further against the US dollar over the coming quarters as its external sector continues to suffer from depressed commodity prices, while the accompanying fiscal adjustment acts as a drag on economic growth. Given that the central bank has been selling reserves to defend the currency aggressively, we have pared back our 2016-average forecast for the unit to PGK3.135/USD, from PGK3.200/USD previously. However, this is unsustainable and we now expect the kina to weaken to 3.350/USD by end-2017, versus PGK3.000/USD previously.

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Economic Analysis - BoK To Cut Rates In 2017 - JAN 2017

China & North East Asia November 2016 / South Korea / Economy

The BoK's decision to keep its base rate steady at 1.25% during its monetary policy meeting on November 11 was in line with our expectations. We expect the central bank to remain on hold for the rest of 2016 amid domestic and external political uncertainty. However, we forecast the BoK to cut rates by 25 bps to 1.00% due to growing domestic economic headwinds while inflation remains below the central bank's 2.0% target and house cooling measures take effect.

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Economic Analysis - Demonetisation - A Bold Step In Modi's Long Term Anti-Corruption Strategy - JAN 2017

South Asia November 2016 / India / Economy

We believe that the demonetisation of INR500 and INR1,000 bills on November 8 will trigger a temporary disruption to India's cash-reliant domestic economy. While we are maintaining our real GDP growth forecast of 7.2% for FY2016/17 (April - March), we highlight that the measure, if poorly administered, could lead to more lasting damage in rural parts of the country. Nevertheless, we believe that the measure also signals Prime Minister Narendra Modi's resolve to tackle corruption, which bodes well for further anti-corruption reforms that will cumulatively enhance India's long term growth prospects.

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Political Risk Analysis - Violence Exposes Fault Lines Between Military And Government - JAN 2017

South East Asia Vol 1 November 2016 / Myanmar / Political Risk

The resurgence in violence in Myanmar's Rakhine state following attacks at the border on October 9 highlights the continued difficulties the ruling NLD faces in working with the influential military. The military's actions in Rakhine also suggest that the army retains a considerable degree of influence, particularly along the unstable borders. We believe that the NLD's relationship with the military is unlikely to change over the coming quarters, with relations continuing to be characterised by mutual wariness and distrust.

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Economic Analysis - Stabilising Environment Positive For Growth - JAN 2017

South East Asia Vol 2 November 2016 / Malaysia / Economy

We maintain our forecast for Malaysia's 2016 real GDP to grow by 4.1%, following growth of 4.2% y-o-y in Q316. With both external and domestic conditions showing signs of stabilising following a gradual pick up in the tech cycle and a recovery in commodity prices, we maintain our 2017 real GDP forecast at 4.7%.

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