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The real surprise with Asia easing: There’s more to come

Slowing global growth and low commodity prices may continue to force Asia's central banks to cut rates to boost domestic demand and lift inflation, analysts say.

"If the support from external demand remains weak, then the urgency for policymakers to act to ward off deflationary pressures and boost domestic demand will increase," Morgan Stanley Asia economist Derrick Kam told CNBC by email.

"We expect further monetary easing in the months ahead," he said.

Exports have traditionally powered Asia's economies but growth has slowed recently. In a note published on Wednesday, Morgan Stanley surveyed eight countries -- China, India, Indonesia, Malaysia, the Philippines, South Korea, Taiwan and Thailand – and found that exports grew by an average 3.8 percent between 2012 and 2015, compared to an average 12.8 percent between 1992 and 2007.

Read MoreChina likely to ease again if inflation falls

To help encourage consumers and businesses to spend more and fill the gaps left by dwindling export demand, India's central bank has cut its benchmark policy rates twice so far this year. Meanwhile, in February, Indonesia and China each cut their rates by 25 basis points.

Thailand's central bank jumped on the easing bandwagon on Wednesday, unexpectedly cutting its benchmark policy rate by 25 basis points to 1.75 percent. On Thursday, the Bank of Korea (BOK) followed suit, surprising markets with a 25 basis-point rate cut to a record low 1.75 percent.

"The disinflation and dovish surprise by central banks themes have further to run in Asia," said Credit Suisse in a research note published on Monday.

MYEONG DONG SHOPPING
SeongJoon Cho | Bloomberg | Getty Images

Weak Japanese and European demand

Asia's central banks are looking at further action because the rest of the world is not yet ready to help boost demand. A robust U.S. economy will not be able to pick up the slack left by anemic demand in Japan and the euro zone, analysts said.

The U.S. economy is set to grow by 3.6 percent in 2015, but Japan's by only 0.6 percent and the euro zone by 1.2 percent, according to the International Monetary Fund.

"Exports to the U.S. have become the key support to the (Asian) region's overall exports since June 2013," Morgan Stanley said in a note on Wednesday.

On top of an uneven global recovery, some sections of the Asian export economy are faring worse than others.

Manufacturing exports have grown an annual 4 to 6 percent in value over the past three years, but that hasn't been strong enough to compensate for the plunge in commodity prices.

Mineral fuel exports, for example, have dropped by over 20 percent in value since last summer, according to Morgan Stanley figures. During the same period, crude oil prices have fallen by over 50 percent.

Do central banks have the remedy?

The collapsing oil prices will only raise the specter of growth-sapping deflation, analysts say, putting further strain on the region.

With oil prices again skimming near six-year lows, central banks across the region will come under "increasing pressure to ward off deflationary pressure and boost domestic demand," said Morgan Stanley in the research note.

Lower oil prices likely played a role in the BOK's decision to cut rates on Thursday, for instance.

Exports generated 53.9 percent of South Korea's gross domestic product (GDP) in 2013, compared with 26.4 percent for China, according to World Bank data.

South Korea's exports fell 3.4 percent year-on-year in February and "a sharp drop in oil import bills has aggravated the contraction in prices," according to the Credit Suisse note.

Meanwhile, consumer price inflation in South Korea slowed to 0.5 percent on-year in February and the sharp fall in oil prices will "have a significant impact," said Credit Suisse. So far this year the country's GDP has grown by a "modest" 2.7 percent on an annualized basis, the bank added.

Read MoreIndia's government faces clash with RBI over rates

Morgan Stanley's Kam expects further monetary easing this year in China, India, Indonesia, Malaysia and Thailand.

But central banks outside Asia are unlikely to ease unless oil prices decline again.

With oil prices currently rising and the U.S. Federal Reserve expected to raise interest rates around mid-year, "we have seen the peak of the disinflationary shock in many countries…and the window of recent EM policy easing [outside of Asia] is starting to close," said Credit Suisse.