According to the chief Asia economist at Morgan Stanley, commodity demand in the continent has not grown as hot as many other places during the period during and after the pandemic. Weak demand in advanced economies is expected to negatively affect Asia’s exports.
Compared to some developed countries or economic regions such as the US and Europe, inflation in Asia peaked earlier, according to Chief Asia Economist at Morgan Stanley.
“Inflation has peaked if you look at the recently released data. More importantly, the price pressure in this area will decrease in the near future,” Chetan Ahya shared in CNBC’s “Squawk Box Asia” column.
“On average, inflation in Asia peaked at 5.5% and according to the latest statistical data, inflation has fallen by about 0.5%. This figure is lower than the peak of inflation in the US of 9% and in Europe of 8.5-9%.”
A market in Thailand. Photo: Reuters.
Ahya shared that commodity demand in Asia has not grown as hot as many other regions, while growth in most countries is still below pre-pandemic levels.
“The way I would describe the economic recovery in Asia is that most of the countries here are in the middle of a growth cycle. I think that is an important reason to help inflation here soon be controlled and central banks do not have to be too drastic to tighten monetary policy.”
Last week, Bank of Thailand Governor Sethaput Suthiwartnarueput said the agency did not necessarily need to “raise interest rates too aggressively” as the country’s economy is forecast to soon return to pre-pandemic levels by the end of the year.
Concerned about export prospects
Like many other countries, rising commodity demand is one of the main reasons for inflation in many Asian countries, according to a group of experts from Morgan Stanley.
“For example, the demand for goods in the US increased during and after the pandemic in the US, causing an imbalance of supply and demand. But the situation is gradually improving, the demand is going down,” emphasized Ahya.
With many supply chain bottlenecks loosened and inventories rising, Morgan Stanley forecasts commodity demand will decline over the next few months. Besides, the labor market in Asia is not as hot as in the US, which helps the region control inflation pressure better, he added.
However, the decline in commodity demand, especially in some developed economies, will negatively affect Asia’s export prospects in the near future.
“Asia’s exports used to grow about 10% a year ago. But this growth is slowing, and we think the prospect of this region’s merchandise exports will not increase too strongly,” he said.
@ Cafef