[CC may contain inaccuracies] Quite a surprise here in the Philippines what did not what didn't we see.
Yeah good morning guys. Yeah it is indeed a positive surprise. I was seeing a particularly strong private consumption print. So
there are some signs that consumer spending is coming back to life after being in the doldrums for several quarters. And
that's despite you know unemployment rates remaining relatively high because of some of these partial lockdowns that are still
in place. So that's a bit surprising. I don't get it. And I think it's obviously construction and investment spending
overall has been pretty strong. We know this of course because the government puts a strong priority on construction activity
and they've accepted it in the lockdowns. And so things have continued to progress. And I think that's going to be the case
for the rest of the year maybe ahead of the elections as well. You know what the growth bounce back so big. I mean Asian
inflation has remained quite low. If you compare to the US in Europe you mean are we likely to see inflation pick up quite
substantially in Aussie on including the Philippines. Well it's a mixed bag in ASEAN. I'd say the countries that have
done well under recovery in particular Singapore I think is the one that's going to be facing more inflation pressures which is
why the central bank has already started to normalise ethics policy. But the rest I think is still very muted and a lot of it
has to do with the fact that fiscal subsidies remain in place. So you've got that in Indonesia and Malaysia as well. The
exception here is the Philippines. So it has been a story of you know a weak recovery. And you know
even with a strong Q3 GDP number output levels is still six percent below pre pandemic. So it's still it's it's some
recovery but not quite as strong as the others. And yet it has inflation that's already well above target for or for several
months now. And I think it's continuing to continue to be the case given surging energy prices and the spillovers of that into
the rest of the CPI basket. So I think it's it's a fairly tough environment for for policymakers in the Philippines in
particular. What. Well what can and should they do then. You mean because I
mean consumption. Yeah. It's we're back. But is it a one off. And you know when you get the sort of inflationary effects
coming through what is 2022 look like for you. Yeah. So the sustainability of this recovery Q3 I think still
remains a big question mark for me. Two things really. One as we've been saying all along. You know
the the fiscal support measures relative to what we see in other neighbors in the Philippines is really pretty low. And you know
it's going to pick up by infrastructure. But I think still not enough. And then too I think the vaccination
case has been lagging. So I think as of early November full vaccination rates about twenty six percent of the population.
And you know I think that still makes him vulnerable to a resurgence in cases and maybe a recurrence of further lockdowns
you know in the months ahead. So I think that that's going to be fairly disruptive and again makes the outlook a little bit more
uncertain compared to the others who have already gone. Eighty eight percent of their vaccination rates. So you know that seems
to be a threshold for them to be able to meaningfully reopen. I think that's not the case for this should be at least in the
next three months or so. But even if you just take the raw numbers and see the recovery
as it is in the Philippines how can you actually also perhaps transpose that onto other ASEAN economies there as well. And can
they expect a decent bounce here. Yeah I would be careful in extrapolating this to the rest of ISE
and again his stories is fairly different. Singapore is already back to people that levels. So that's that's pretty strong.
Indonesia we've got the numbers last week quite close. So you know about 1 percent below pre called it. Philippines like I
said is minus 6 percent. The big laggard I think will still be Thailand. Right. Because forever is. You know it's so very
dependent tourism. They've started to reopen the borders. But if you take into account the quarantine restrictions of home
countries of these visitors know when they return there's a pretty stringent ticket for China. So which is the biggest
source for for Thailand's tourism sector. So I think that the recovery will still lags far behind the rest of the region for.
For Thailand and maybe I think slightly better will be the Philippines. But as I said a bit uncertain still. How much room
is there for any kind of action from the central banks right now. ASEAN you then went when you have a Fed and other developed
markets that are looking at tightening now. Yeah good question. I think now much more room for them to do
anything. The most they can do is to give a sort of a what we call a sort of in hands for guidance to basically tell. Market
said look we're going to keep accommodative policy settings for as long as we can with the aim of trying really to make the
recovery well entrenched. So you know even with the global financial conditions potentially tightening because of the Fed I
think rate hikes in the region is still some way away. So we're expecting rate hikes in these central banks only in the back end
of next year. Essentially I mean they may well follow what the Fed does but
you know we have the reduction in bond buying taking place and possibility that we could see yields moving to the upside. And
of course the dollar is in play here. How does all that play out for these various economies.
Well weakening a currency in the region thankfully does not have too much
inflationary pass through before. So this is why is no contribution on inflation in terms of overall policymaking as
this kind of less of an issue at the moment maybe with exception of the Philippines but yet again. For example energy prices keep
going higher. I think that that will be an issue for some countries especially the laggards in the Philippines and
Thailand because they're very dependent on coal and LNG imports. And there's no room for subsidies or they're not doing too much
of the subsidy as much as we're seeing in the other countries. So inflation could still be an issue and that could be
reinforced by a stronger dollar a weak currency for these countries. And then that might force the central banks to sound
a bit more hawkish. But again we don't expect that to happen in the near term. It's probably they can be they can afford to be
patient at this time. I would say. OK. A final one on those two laggards that you point out.
Thailand and the Philippines obviously with the GDP numbers out give us a sense of when you think the labor markets in each of
those countries manages to recover to pre pandemic levels. I think it's gonna be a while so I think the markets in these
countries are still adjusting lower in the sense that you know jobs are still being created. In fact there are still some
losses and and labor markets don't rebound as quickly as how you see it in the headline numbers. Right. Just go. Just because of
some friction. So especially in these countries. So I don't expect really employment to come back in a strong way until we
see growth coming back to trend. You know preplanned damage. So in Tyler's case maybe for four and a half. Philippines it was
running six six and a half. So you know we're still far from that. And until that happens labor market pressures will still
be pretty much in the downside.