Exchange rate weak point in the face of a strong U.S. dollar is a larger issue for Asia than inflation, Taimur Baig, handling director at DBS Bank in Singapore, informed CNBC on Thursday.
“We’re not especially fretted about inflation driving policy, however currency exchange rate weak point, dollar liquidity drying up, those things [are] a larger concern, [and issues such as] the balance of payments angle,” Baig informed CNBC’s “Street Signs Asia.”
“If indeed input prices are going up for next year, even a country like India — which produces a lot of food for itself and exports to the rest of the world — would start becoming a bit insecure about food supply for 2023,” he stated.
Baig, who is likewise primary financial expert at DBS, stated an international energy crisis feeding into inflation might result in a bleak winter season ahead.
” I discover it really hard to see how the gas circumstance for Europe is solved anytime quickly … China has yet to leave … its absolutely no-Covid policy. [The energy crisis] is not just a problem with regard to keeping houses warm, it is likewise a huge consider figuring out the food inflation outlook of next year,” Baig stated.
“The issue is in Europe, but that affects energy prices worldwide,” he stated, including that supply side inflation is most likely to stay raised all through 2023 with “adverse implications” for the international economy.
The financial expert stated there is “room and need” for Asian nations to support their economies through financial policies.
“On the monetary policy side, there is unfortunately no respite. They have to hike rates to slow economies down to keep the current account on a sustainable basis,” Baig stated.
“So this is why even a country like India, which is a darling of investors these days, I think still faces substantial headwinds going into 2023. And of course, the other big headwind in Asia is China, for its own idiosyncratic reasons,” he stated.
Separately, IMA Asia’s Richard Martin informed CNBC the dollar is nearing its peak. The IMA handling director stated Thursday that reserve banks of the much better emerging economies will continue to increase rate of interest in anticipation of more tightening up in the U.S.
“And … as they close that yield gap, the extra push into the U.S. dollar assets starts to ease back,” Martin informed CNBC’s “Street Signs Asia.”
He included he does not anticipate emerging market currencies, a few of which are down by 6% to 8% over the previous year, to decrease even more. He anticipated these currencies to begin rebounding to their previous levels by early next year.
