20 January 2024Deutsche BankResearch Asia Economics Asia Week Ahead Date Week aheadSouth Korea is likely to report another quarter of trend growth (2.2% [0.6%QoQ sa]), led by an improvement in exports. Exports rose 5.8% in Q4 (vs. -9.6% in Q3), leaving a wider trade surplus of USD9.6bn (vs. USD6.4bn in the same period), implying that trade contributed more strongly to growth. The latter should counter domestic demand weakness – investment in particular, which fell 10.9% in Oct/Nov (vs. -10.5% in Q3). Meanwhile, retail sales fell 2.9% (vs. -3.5% in the same period). In terms of sequential growth, overall production data suggests steady growth (a 4.3% 3m/3m saar in Nov) from the previous quarter (4.3% in September), led by manufacturing. We believe that the Bank of Korea (BoK) has turned neutral, and we maintain our expectation for the bank to commence its rate cuts in July – although risks are tilted to the downside, amid elevated concerns over project financing (PF) loans and "sluggish" domestic demand. The BoK views the recovery in private consumption as "weaker than anticipated", and it expects inflation to show a slowing trend (albeit at a moderate pace), with payroll growth slowing, led by services – although the recovery of the semi industry (exports) should support headline GDP growth improvement in 2024.In its November policy, the Central Bank of Sri Lanka (CBSL) reduced its policy rate by 100bps (in line with our expectations), stating that "further monetary policy easing will be paused in the near term". Since the crisis, the CBSL had raised its policy rate by 1,050bps, of which 650bps were reversed in 2023 (we had forecasted a 700bp easing for 2023). In our view, the CBSL seems reluctant to cut rates any further. Therefore, the November rate cuts may mark an end to the easing cycle. However, given that the CBSL used the word "paused", we think the central bank may have room to cut the policy rate by another 50bps in 2Q'24, contingent upon Sri Lanka's inflation trajectory and once the monetary transmission of the current rate cuts is complete by then. Hong Kong's CPI is forecast to remain largely unchanged at 2.5% in December. Exports are expected to increase to 8.7% YoY from 7.4%, while imports are likely to decline to 6.8% YoY from 7.1%.Malaysia's GDP surprised sharply to the downside in Q4, posting +3.4% YoY growth in Q4 (vs. the market expectation of 4.1% growth), moving largely sideways from +3.3% in Q4. On a sequential basis, the economy contracted by 1.7% QoQ sa in Q4, after three consecutive quarters of rapid expansion, with the Q3 rate at +2.6%. The Q4 GDP result (advance estimate) left Malaysia's annual growth lower at 3.8% in 2023 (vs. 8.7% in 2022), dragged down by weak manufacturing. On the Juliana LeeChief Economist+65-6423-5203Kaushik DasChief Economist+91-22-7180 4909Yi Xiong, Ph.D....
