• Philippines’ export growth fell for the second consecutive month by 2.3% yoy in February compared to a decline of 4.8% in January.
• In Thailand, headline inflation declined for the thirteenth consecutive month albeit at a slower pace of 0.1% yoy in March compared to -1.2% in February
• Singapore’s retail sales in February expanded by 5.2% yoy from -6.1% yoy in January, its first positive growth since January 2019.

Philippines’ inflation eased for the first time in six months to 4.5% in March

Philippines’ export growth fell for the second consecutive month by 2.3% yoy in February compared to a decline of 4.8% in January. However, imports rebounded by 2.7% yoy in February from -12.1% in January. As a result, the trade deficit narrowed to US$2.3bn from US$2.9bn in January. In the near term, we believe there are still downside risks to the trade performance especially with the resurgence of Covid-19 cases, which has led to the extension of lockdowns in Metropolitan Manila and four provinces until April 11. Nevertheless, going forward, we expect the country’s trade to be supported by the rollout of vaccines and gradual easing of containment measures. Besides that, the Philippines’ Trade Undersecretary has also recently guided that the Philippines intends to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which will further support access to key markets.

In the same week, Philippines’ inflation rate eased for the first time in six months to 4.5% yoy in March (4.7% in February) mainly led by slower rise in prices of food and non-alcoholic beverages. In 1Q21, the inflation rate averaged 4.5% which is above the central bank’s target range of 2-4%. Going forward, Bangko Sentral ng Pilipinas (BSP) guided that it expects inflation to likely settle above the upper end of its target range in 2021 led by supply-side constraints on prices of key food commodities. Therefore, we expect BSP will likely leave its key policy rate unchanged at 2% and maintain a wait-and-see approach in the coming months as it will assess the inflation trend as well as the effectiveness of its vaccine roll out.

In Thailand, the headline inflation rate declined for the thirteenth consecutive month albeit at a slower pace of 0.1% yoy in March compared to -1.2% in February. Slower fall in inflation was largely driven by the rise in costs of transport and communication of 5.4% yoy (+1% in February). In the coming months, we expect higher global oil prices will continue to add some upward pressure to headline inflation. However, as inflation continues to be below the Bank of Thailand’s (BOT) inflation target range of 1-3% and with limited room for further rate cuts, we still expect policy rate to stay at its all-time low of 0.5% with more emphasis on fiscal policy measures instead to support economic activity.

Separately, Singapore’s retail sales in February expanded by 5.2% yoy from -6.1% yoy in January, its first positive growth since January 2019. The rise in retail sales during the month was mainly driven by the Chinese New Year celebrations. Despite the seasonal jump in retail sales, we anticipate the gradual reopening of its economy alongside the ongoing rollout of vaccines to support retail spending and domestic demand in the coming quarters.

Source: Affin Hwang Research - 9 Apr 2021