Economist says dollar strength is more worrying than inflation in Asia

Timur Baig, managing director of DBS Bank in Singapore, told CNBC Thursday that a weak exchange rate in the face of a strong US dollar is a bigger concern for Asia than inflation.

“We are not particularly concerned about the policy driving inflation, but the weak exchange rate, the depletion of dollar liquidity, and those things [are] bigger issue, [and issues such as] Balance of Payments angle,” Paige told CNBC’s “Street Signs Asia.”

“If input prices are really going to go up next year, then even a country like India – which produces a lot of food for itself and exports to the rest of the world – will start to feel a little insecure about the 2023 food supply,” he said. .

Page, who is also the chief economist at DBS, said the inflation-fueled global energy crisis could lead to a bleak winter ahead.

“I find it very difficult to see how the gas situation in Europe is resolved any time soon…China is not yet out of the…no-coronavirus policy. [The energy crisis] It is not only an issue of keeping homes warm, but it is also a very big factor in determining food inflation expectations for the year ahead.”

“The issue is in Europe, but this affects energy prices around the world,” he said, adding that supply-side inflation is very likely to remain high throughout 2023 with “negative repercussions” on the global economy.

The economist said there is “room and need” for Asian countries to support their economies through fiscal policies.

“On the monetary policy front, unfortunately there is no respite. They have to raise interest rates to slow economies to keep the current account on a sustainable basis,” Page said.

“And that’s why even a country like India, which is so popular with investors these days, I think it still has big headwinds by 2023. And of course, the other big headwinds in Asia is China, for reasons of its own,” he said.

Separately, Richard Martin of IMA Asia told CNBC that the dollar is nearing its peak. The managing director of the IMA said Thursday that the central banks of top emerging economies will continue to raise interest rates in anticipation of further tightening in the United States.

“And … as that yield gap closes, the additional rush into US dollar assets begins to subside,” Martin told CNBC’s Street Signs Asia.

He added that he does not expect emerging market currencies, some of which have fallen by 6% to 8% over the past year, to fall further. He predicted that these currencies will begin to recover to their previous levels by early next year.