Barclays Emerging Asia Outlook Keep calm and carry on

FICC Research Economics 14 August 2026

Keep calm and carry on With the US CPI and PPI data reaffirming our US economists' view for a Fed hold through 2027, we believe the monetary policy divergence in EM Asia focusing on domestic conditions Brian Tan will continue. Barclays Bank, Singapore

With our US economists expecting July core PCE to rise 0.2% m/m (3.2% y/y) following July Bum Ki Son, CFA CPI and PPI data, this should likely comfort FOMC centrists and support a steady policy + rate path. As a result, we expect the status quo for the policy divergence in emerging Asia Barclays Bank, Singapore to continue. Despite the recent volatility in oil prices and oil supply chain bottlenecks, we believe the regional idiosyncrasies are featuring more in the policy stance of different central Aastha Gudwani banks. • We continue to see the central banks in economies benefiting from the AI-driven tech supply BSIPL, India

chain to retain their hawkish stance - namely in Korea, Singapore, Taiwan, and Malaysia. Amruta Ghare • In contrast, we continue to expect central banks in Indonesia and the Philippines to keep policy rates unchanged after the earlier hikes in H1 2026 (effected in response to oil prices and BSIPL, India FX gyrations earlier).

• On the other spectrum, central banks in India and Thailand are expected to keep rates unchanged through 2026.

Monetary policy divergence to continue BI likely remaining on hold as FX pressure reduced We expect Bank Indonesia (BI) to keep rates unchanged at 5.75% next week. With the pressure on IDR modestly reducing, we believe the case for the BI to resume its hiking cycle is a low chance event. Another tail risk is that the central bank cuts the policy rate by 25bp following the change in leadership. Our base case remains for the BI cutting rates in March, April, May and June 2027, to 4.75% but also with risks to delay. Any tail risk scenario of earlier cuts, in our view, will be accompanied by the SRBI cut first. We broadly expect continuity in the policy framework with the new Governor Destry Damanyati.

Inflation remains tamed and RBI can look through the food prices In India, July CPI inflation data reaffirmed our view for the Reserve Bank of India (RBI) maintaining its policy rate unchanged through 2026. July CPI inflation edged up to 4.45% y/y in July from 4.38% in June, roughly in line with our estimate. Average CPI inflation during April- June period had surprised the RBI's June forecast to the downside by 30bp; incorporating the July print, we expect FY26-27 CPI inflation to average 4.8% (versus our forecast for 5% previously), with H2 2026 inflation likely above 5%. That said, inflation is likely to be driven by higher food prices and administered prices; we expect the RBI's MPC to look through the higher inflation and persist with a pause for the remainder of 2026.

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Barclays | Emerging Asia Outlook

Taiwan Q2 GDP showed strength in domestic demand continuing Strong Q2 GDP in Taiwan reinforces our view that the domestic economy could be overheating, potentially requiring an earlier hike from the CBC in September. While Q2 GDP was modestly revised to 12.93% y/y from 12.92%, revision of Q1 GDP to 15.43% from 14.55% previously and steady outlook for exports and domestic demand resulted in the government upgrading its 2026 forecast to 11.05% from 9.64% (versus our forecast of 10.5%). We note that private consumption is now running above-trend and there are expected spillovers from the broadening out of tech exports from GPU to other tech hardware products. What's more notable this time is that even the government expects 2027 GDP and inflation to be hot - GDP growth forecast at 6.04% and CPI inflation at 1.9%. We believe this vindicates our view that domestic demand is overheating, and continue to expect the CBC hiking rates by 12.5bp in September.

Korea: Despite the weak labour market data, market focus on back-to-back hike continues In contrast, we believe domestic demand in Korea has not been as concerning as in Taiwan with still weak labour market and latest credit card data showing softness. As such, we believe…