Taimur Baig, managing director at DBS Bank in Singapore, told CNBC on Thursday that the weakening of the exchange rate in the face of a strong US dollar is a bigger concern than inflation for Europe. ASIAN.
“We’re not particularly worried about policy boosting inflation, but exchange rates weaken, dollar liquidity dries up, those [are] a bigger problem, [and issues such as] balance of payments angle,” Baig told CNBC’s “Street Signs Asia”.
“If it is true that input prices rise next year, even a country like India – which produces a lot of food for itself and exports to the rest of the world – will start to lose money,” he said. beginning to become uncertain about food supplies for 2023. .
Baig, who is also chief economist at DBS, said a global energy crisis coupled with inflation could lead to a dismal winter to come.
“It is very difficult for me to see how the gas situation in Europe will be resolved any time soon… China has not yet come out of… its no-Covid policy. [The energy crisis] Not only is it a matter of keeping homes warm, Baig said, but it’s also a very important factor in determining the outlook for food inflation next year.
“The problem is in Europe, but that affects energy prices around the world,” he said, adding that supply-side inflation will most likely continue to soar through 2023 with “inflation effects.” adverse effects” on the global economy.
The economist said there is “room and necessity” for Asian countries to support their economies through fiscal policies.
“In terms of monetary policy, unfortunately there is no respite. They have to raise interest rates to slow down the economy to keep the current account on a sustainable basis,” Baig said.
“So this is why even a country like India, which is a favorite among investors today, I think still faces big headwinds as we head into 2023. And of course, the other big wind in Asia is China, for their own unique reasons,” he said.
Separately, IMA Asia’s Richard Martin told CNBC that the dollar is nearing a peak. The IMA CEO said on Thursday that better emerging-market central banks will continue to raise interest rates in anticipation of more tightening in the US.
“And… as they closed that yield gap, the extra push to the US dollar asset started to fade again,” Martin told CNBC’s “Street Signs Asia.”
He added that he does not expect emerging market currencies, some of which have fallen between 6% and 8% over the past year, to continue to go down. He predicts these coins will begin to recover back to their previous levels early next year.
