Southeast Asian central banks, including the Bangko Sentral ng Pilipinas (BSP), are expected to hold off raising their policy rates until early 2023 as their economies have yet to go back to their pre-COVID levels, according to Oxford Economics.
In a brief penned by Sian Fenner, lead economist on Asia, the research firm said emerging Southeast Asian central banks were in no hurry to raise rates, with gross domestic products (GDP) still between 4 percent and 6 percent short of their 2019 sizes.
Oxford Economics sees Bank Indonesia considering a rise in interest rates only when the US Federal Reserve begins to do so. US regulators are seen doing this in late 2022.
“Elsewhere, we expect Malaysia, Thailand and the Philippines to remain on the sidelines until [the first quarter of] 2023,” Fenner wrote.
Despite projections of GDP growth in emerging countries of Southeast Asia going above trend in 2022, Oxford Economics expects that the economic cost of restrictions and COVID-related disruptions will take time to unwind.
The company estimates that the US Fed will start raising their policy rate in September next year.
Among developed economies in the Asia-Pacific region, some have already begun to tighten policy, and Oxford Economics expects central banks to progress further with normalization through 2022.
“In contrast, most emerging Asia-Pacific economies are likely to lag the Fed in lifting rates,” the company said.
“We look for most Asia-Pacific central banks to raise policy rates by a modest 25 basis points to 50 bps over 2023,” it added.