Economic Highlights: GDP & Inflation

GDP : Real GDP recorded a smaller decline of 1.2% yoy in the 3Q, outlook Improving
Economic Highlights (published 20 Nov 2009)
- Real GDP recorded a smaller decline of 1.2% yoy in the 3Q, compared with -3.9% in 2Q and -6.2% in 1Q.
- This was better than consensus estimate of -2.4% and our expectation of -2.7%, on the back of a pick-up in domestic demand driven largely by the Government’s stimulus spending and a smaller decline in exports.
- As a result, we now expect 4Q real GDP to expand at a stronger pace of 2.1% yoy versus our earlier estimate of +1.0% and real GDP for the full-year to contract by a smaller magnitude of 2.3% in 2009, compared to our earlier expectation of -3.0%. For 2010, we are keeping our real GDP growth forecast unchanged at +3.8%.

Inflation : Inflation rate fell by a smaller magnitude in October
Economic Highlights (published 20 Nov 2009)
- The contraction in the headline inflation rate narrowed to 1.6% yoy in October, from -2.0% in September. This was the second straight month of a smaller contraction in inflation rate, on the back of a smaller decline in the core inflation rate. This was, however, mitigated by slower increase in prices of food & non-alcohol beverage during the month.
- Going forward, we expect inflation rate to move back to positive territory towards the end of the year and it is expected to continue its upward trend and accelerate to 2.0% in 2010, from an estimate of +0.7% in 2009. We believe the Central Bank is likely to maintain its overnight policy rate unchanged at 2.0% for the rest of this year and at least until mid-2010 with prospect of a 25-50 basis points hike in 2H 2010.