Exchange rate weakness against the U.S. dollar is more of a concern for Asia than inflation, Taimur Baig, Managing Director at DBS Bank in Singapore, told CNBC on Thursday.
In case input prices increase for next year, India may have difficulties with food supply even though they have been exporting to other countries, the man says. BofA’s Chief Economist warns that the recent high oil prices could lead to inflation, plunging us into an even colder winter.
There is still no clear plan on how to handle the Europe’s gasoline dilemma … China is struggling to alleviate their own production deficits … so much is resting on their investments in our solar panel sector, if the high oil prices were to somehow prompt investors to cash out in China the result would be an economic collapse for them. The ongoing gas crisis in Europe will continue to disrupt the country’s coal industry, meaning increased coal costs for homes. There is not only an impact to residential heat, but food prices are being driven up, Baig said.
the problem is in Europe, but it affects energy prices worldwide. The good news is that we’re likely to see higher levels of supply side inflation that won’t decline. And these effects are likely to be seen for years to come.
The economist said fiscal policies can assist Asian economies to support their economies.
On the monetary policy side, there is unfortunately no respite. They must increase rates to slow down economies in order to balance the current account, Baig said.
“This is why even a country like India, which is a darling of investors these days, will probably still experience substantial headwinds in 2023. The other big headwind in Asia is China, for its own unique reasons,” he said.
Separately, CNBC’s Richard Martin said the dollar is nearing its peak. As a result of more tightening in the United States, the central banks of the better emerging economies will continue to raise interest rates.
The extra push into US dollar assets eases back as they close the yield gap, Martin told CNBC’s “Street Signs Asia.”
He commented that he does not anticipate emerging market currencies to fall even more, as some of them have fallen 6-8% in the past year. By early next year, these currencies are expected to return to their previous levels.
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