As emerging-market bulls start to signal the worst may be over, domestic risks across Asia are worth keeping in mind for 2019: from central-bank autonomy in India to the price of rice in the Philippines.

On track for their worst year since 2015, developing markets are getting a tailwind from the US-China trade truce, a weakening dollar and a more cautious tone from the Federal Reserve. Morgan Stanley forecast next year will feature a comeback for emerging markets as external headwinds ease. John Woods, chief investment officer for Asia Pacific at Credit Suisse Group, reckons “EM is looking pretty cheap” after a turbulent year.

But not all are forecasting a rebound. The Bank of America strategist David Woo says he wouldn’t touch emerging markets “with a 10-foot pole” citing concerns about market volatility. And even some clients of Morgan Stanley are less bullish, according to the US bank, citing China as “a significant risk” amid trade negotiations, on top of the growth slowdown there.

Below are a list of risks in other emerging Asian countries that investors could be missing by focusing too much on global pressures:


Shock resignation on December 10 of Reserve Bank of India Governor Urjit Patel and his swift replacement added a heavy dose of uncertainty to the investment climate after a tense public fight over policy; RBI is likely to shift to dovish tone under new governor, said Abhishek Gupta at Bloomberg Economics.

Rupee remains Asia’s worst performing currency this year, by far, and the RBI shakeup raises questions about whether policy makers will be able to act independently.

General elections loom for sometime in March or April and state elections this week point to less favourable results for Prime Minister Narendra Modi; Suresh Tantia, an investment strategist at Credit Suisse in Singapore said Indian equities haven’t priced in political risk, and a coalition government replacing Modi would make the outlook for current reforms uncertain.

One bright spot for India is cheaper oil prices, which are taking away some pain for policy makers. They had to get creative earlier this year when costs of the nation’s biggest import rocketed.


Southeast Asia’s biggest economy has been rewarded for its aggressive monetary policy stance, with the rupiah recovering to about 14 600 against the dollar after reaching a more than two-decade low of 15 238 in October.

President Joko Widodo faces an April re-election battle against his old rival Prabowo Subianto, whose economic policies are yet to be fully outlined Indonesia’s ease-of-doing business ranking slipped to 73 this year while others in the region gained; attracting steady flows of investment will be critical to completing a swath of planned infrastructure projects and retaining interest among foreign investors across other industries.


Inflation that’s surged this year far beyond the central bank’s target range has shown some initial signs of easing, with more likely to come as oil prices fall. One test for officials’ ability to rein in inflation, and to soothe consumers who are more pessimistic than at any time in four years, will be their ability to help stabilize prices for rice.

Legislation set for President Rodrigo Duterte’s signature should ease restrictions to damp costs that hovered near all-time highs this year. Faster price growth this year has proven more widespread than food and fuel, with core CPI also on the rise; there might yet be some more structural inflation at work and ahead of the May 2019 midterm elections. Credit growth that’s running more than twice the pace of economic expansion is pumping into a debt bubble, a red flag in the view of Morgan Stanley’s Deyi Tan.


Ruling military regime lifted a ban on political activity ahead of a general election on February 24, which the Election Commission confirmed as the date for the vote to be held; the path of policies, including on massive infrastructure projects, could be in flux if the government changes hands

Thailand’s solid economic fundamentals could be undercut by sagging agricultural prices, bringing pain to a sector that typically makes up more than 5% of growth; officials have planned to provide some financial cushion for farmers.

High household debt — at 77.5% of GDP in the second quarter — is also pressuring consumers, Somchai Jitsuchon, a member of the Bank of Thailand’s monetary policy committee, told Bloomberg in November.

The bubbling mortgage debt has been on the radar of the policy makers, who recently tightened lending rules to stem debt run-up.

Tourism, which makes up about about a fifth of the economy, is yet to recover from a downturn in Chinese visitors in the wake of a July boat incident in Phuket While most central banks in the region have had to hike interest rates to stem investment outflows, Thai officials are navigating a trickier debate around when, and by how much, to build policy space from a near-record-low 1.5% benchmark rate; economists in the Bloomberg survey are split 7-5 for the December 19 decision, with a slim majority seeing a hike.