Macro Insights Weekly: Contrasting growth trends in Asia

We take stock of the contrasting GDP momentum in the region. Exports and re-opening provide support in some countries, while inflation and rising rates are sources of headwinds.
Group Research15 Aug 2022
  • China’s growth may have bottomed, but there are major lingering headwinds
  • Hong Kong has small threads of upside, but the overall outlook is gloomy
  • India’s strong domestic demand dynamic is holding up despite high inflation and rising rates
  • Indonesia and Malaysia are benefitting from booming commodity exports
  • Between inflation hurting and tourism helping, The Philippines is still growing robustly
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Commentary: Contrasting growth trends

Asia’s economies are going in varied direction, but the balance of risk is tilted to the downside. Granted, recent easing of commodity prices, emerging signs that the worst of the pandemic is over for mainland China and Hong Kong, and markets pricing in no more 100bps of additional Fed rate hike in this cycle have provided some breathing room over the past month. But macro risks are by no means fading substantially, particularly for China, as struggles with the property market and tensions with the US continue. Also, the rate of change of commodity prices may have eased lately on a year-on-year basis, the levels of a variety of food and energy product prices are still high by historical standards, and their supply outlook is by no means benign. With those caveats in mind, we take stock of GDP momentum in the region.


Having virtually flatlined in 2Q, China’s economic dataflow, especially with respect to trade, has been improving. Money supply and loans are picking up, which ought to support production and investment sentiment. We continue to expect a little more than 4% growth this year, but would not be surprised if another round of downgrade is warranted later.

Hong Kong

Rising rates and repeated bouts of pandemic-related restrictions have brought down growth momentum, although we expect positive real GDP growth in 2022. Cash vouchers from the government, some resilience in property demand, and expectations of a gradual reopening of international borders in 4Q are the little threads of upside.


Characterised by strong PMIs and production, surging imports, decent monsoon rains, and easing inflation, India appears to be on course to overcome this year’s balance of payments challenges and interest rate hikes. We expect 6%+ growth this year, which would be an impressive outcome given the many headwinds stemming from high food and energy prices.


Indonesia appears to be on course to growing by around 5% this year, better than what we would have expected earlier. A buoyant commodity market has held up the economy, helping narrow the fiscal deficit despite rising fuel subsidies. We see Bank Indonesia to get going with policy normalisation in the coming months as inflation has begun to rise.


Strong domestic demand, booming exports, and a post-pandemic jump in tourism are propelling Malaysia. A slowing global economy may take some momentum away from growth next year, but for 2022, 7%+ growth is in order, as per our analysis.


The Philippines finds growth cooling as rising inflation hurts household spending, despite opening gains. The economy is on track to grow by 7% this year, but the post-pandemic boom is slowing, and growth will likely revert to the trend rate of 6% in the coming quarters.

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Taimur Baig, Ph.D.

Chief Economist - Global


Chua Han Teng, CFA


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