The economic consequences from Russia’s invasion of Ukraine has grown, while the impact of COVID-19 has decreased across most of developing Asia. The global commodity price index has risen to and stayed above 2021’s already high levels as a result of war-caused supply interruptions and tightening sanctions imposed on the Russian Federation.
As a result, inflationary pressures have risen in a lot of different regional economies. Central Asia is experiencing double-digit headline inflation, as is Mongolia in East Asia, Pakistan and Sri Lanka in South Asia, and the Lao People’s Democratic Republic and Myanmar in Southeast Asia. The Reserve Bank of India has set a goal range for inflation of between 2% and 6%, and current inflation levels in India are 7%, which is outside this range. In contrast, both headline and core inflation are still within sustainable ranges across the majority of developing Asia’s large economies. As a result, regional inflation is still below global averages and well below historical norms.
The economic progress of emerging Asia remains vulnerable, largely due to external factors. A significant deceleration in global growth would likely have negative effects on exports, manufacturing activity, and employment prospects, in addition to causing market turmoil.
Even if widely expected, the growth-damaging and market-shaking effects of the Federal Reserve and other major central banks’ aggressive monetary tightening could still occur. The consequences of the conflict in Ukraine could cause a further increase in global energy and commodity prices, which could have an impact on GDP and inflation in emerging economies in Asia. In some economies, food insecurity could be threatened by rising food costs and shortages, which could increase social tensions. There are potential internal dangers that could impede developing Asia’s growth momentum, such as the PRC’s recent round of lockdowns and the country’s growth slowdown having lasting consequences on supply chains.
As a result of slowing private spending and a decline in manufacturing, India’s GDP growth slowed to 4.1% in the fourth quarter of fiscal year 2021 (FY2021, ended 31 March 2022).
India has felt the effects of both the Omicron COVID-19 variety and the economic fallout from the conflict in Ukraine. As a result, GDP growth is lowered from 8.9% to 8.7% for FY2021 and from 7.5% to 7.20% for FY2022. Despite rising levels of consumer optimism, unexpectedly high inflation will eat away at people’s disposable income.
For the fiscal year 2022 (ending 30 June 2022), Pakistan’s GDP growth is predicted to slow as the government takes steps to rein in rising demand pressures and rein in external and fiscal imbalances. In FY2023, growth is expected to tick back up modestly thanks to the aid of structural improvements. Economic activity in Afghanistan has been severely hampered due to sanctions and the block on international development assistance other than humanitarian relief.
Expectations that global prices for gasoline, food, and other commodities will continue elevated, as well as internal reasons in some nations, led to an upward revision of South Asia’s inflation projection from 6.5% to 7.8% for 2022, and from 5.5% to 6.63% for 2023.
The consumer price index (CPI) for India recorded inflation of 7.8 percent in April and 7.0 percent in May, both of which were much higher than the upper bound of the Reserve Bank of India’s target inflation range of 2 percent to 6 percent. Due to the increase in oil prices, the projected inflation rate for FY2022 has been increased from 5.8 percent to 6.7 percent.
The 5.0% inflation rate forecast for FY2023 is now 5.8%.
There has been extreme inflationary pressure in Sri Lanka. Due to several fuel price increases, higher food costs due to poor harvests, supply chain disruptions, shortages caused by a foreign exchange squeeze, and a declining exchange rate, CPI headline inflation averaged 28.6 percent in the first half of 2022.
Inflation stripped of volatile food and energy prices (core inflation) rose from 9.9 percent in January to 39.9 percent in June, averaging 20.7 percent in the first half. As a result, we now anticipate 33.6% inflation in 2022 and another year of double-digit inflation in 2023.
Malaysia’s prospects have dimmed due to rising uncertainty and slower global growth. Still, pessimistic global expectations and supply bottlenecks from PRC cities that have been quarantined to combat COVID-19 outbreaks have a dampening effect on business optimism and the PMI. Due to unfavourable weather and input cost shocks stemming from the conflict in Ukraine, agricultural growth was minimal in the first quarter. The tourism industry is slowly beginning to recover. Although the country reopened its borders to international visitors in April, barely a third of the pre-pandemic level is likely to arrive this year. Downward revisions were made to both 2022 and 2023 growth projections, bringing them to 5.8 and 5.1 percent, respectively.
