Desk Report,
Inflation in major Asian countries including China and India is below 2 percent, while in Bangladesh it is over 8 percent.
While inflation is heating up again in the US, many Asian countries are seeing the opposite trend. Excluding Japan and Bangladesh, the average inflation rate in the continent’s top 10 economies is now just 1.3 percent. Bangladesh’s inflation is still above 8 percent.
Inflation in major Asian countries including China and India is below 2 percent, while in Bangladesh it is over 8 percent.
Consumer prices have actually fallen in China and Thailand, Asia’s largest and the world’s second-largest economies. Other economies, such as the Philippines, are also moving towards deflation rather than inflation. Even in India, which is generally inflationary, prices rose by just 1.6 percent in July; the lowest since 2017. Inflation is within the central bank’s target in several economies. But in five it is already below that limit. Even where it is within the ‘target’, the trend is clearly downward. News from The Economist
Many believe that the reason for this is Donald Trump’s tariff policies. In theory, such tariffs should hit Asian demand—both export prices and production should fall. But in reality, that hasn’t happened; instead, companies shipped more before the tariffs took effect, which has actually boosted exports from many Asian countries to the United States. This trend of low inflation in Asia began in the second half of 2024, before Trump was reelected. The tariffs could bring down prices in the future, but it’s not limited to the past year. A major reason for this trend is China’s overproduction. The downward trend in prices has become permanent in the country. At the same time, it’s having an impact abroad—China’s export price index has fallen by 15 percent since 2022, while exports have increased. The ripple effect has spread around the world, but Asia is taking the biggest hit. China’s trade surplus with developing Asian countries has nearly doubled during this period. Car prices in Thailand fell by 6 percent through July as cheap Chinese models took over the market. In Vietnam and Singapore, prices have fallen due to competition from Chinese smartphone makers.
Energy and food prices have also fallen. Oil prices have been steady as OPEC and its allies have decided to increase output. Meanwhile, food prices have also fallen, after a few years of rising prices due to the Ukraine war and weather-related damage. In 2024, food prices in Asia’s top 10 economies (excluding Japan and Bangladesh) rose by an average of 5 percent. In July, they fell to 1 percent. The decline is not just a “base effect,” meaning that prices are based on the previous year’s high prices; it is also due to a surplus in China, which has pushed down pork prices. Officials are now trying to stem the trend by reducing the number of domestic pigs by one million.
Demand is also weak in many Asian countries. Some places, such as South Korea, are in recession. In countries such as Indonesia, structural weaknesses are holding back the manufacturing sector, leading to job losses and falling consumer confidence. Wage growth has slowed across the region. In some countries, the number of people entering the labor market has increased, putting pressure on wages. Labor force participation has reached record levels in the Philippines, India, Indonesia, and Malaysia. Memories of the painful experience of global inflation in 2022 may have pushed more people into the workforce.
Asian central bankers are also wary of a repeat. As a result, their monetary policy has generally been overly tight; this is essentially a threat to demand.
The Economist reports that this trend of low inflation will be further strengthened in the future due to Trump’s tariff policies. As American demand falls, Asian exports will be pressured. Then the race to find alternative markets will begin. Consumers are suffering from the high cost of living crisis. As a result, they may see the decline in prices as good news; but they are actually a sign of weak Asian economies.
