FocusEconomics: ASEAN Economies Benefitting from Solid Domestic Demand

Pedestrians cross a busy street in Singapore: ASEAN countries, of which Singapore is a member, continue to expand growth, according to the FocusEconomics latest regional report

May 23, 2018//-A more comprehensive estimate of aggregate GDP growth in the Association of Southeast Asian Nations (ASEAN) shows that the regional economy expanded robustly in the first quarter, benefiting from solid domestic demand and accommodative monetary conditions.

 However, many countries’ external sectors appear to have softened in annual terms, due in part to tough prior year comparatives following a surge in exports last year.

 FocusEconomicsa leading provider of economic analysis and forecasts for 127 countries  in Africa, Asia, Europe and the Americas which made this disclosure in its June 2018 estimate.

The region’s economy expanded 5.4% in Q1, up slightly from last month’s preliminary estimate of 5.3% and the prior quarter’s figure of 5.3%. After Singapore and Vietnam reported robust Q1 outturns last month, recent weeks saw other regional heavyweights take center stage, according to the report.

It added that Indonesia—ASEAN’s largest economy—chalked up robust growth thanks to a surge in investment. However, the figure was slightly below market expectations on mediocre private consumption, which was in line with soft retail sales figures in the quarter.

This was likely driven in part by subdued credit growth, despite monetary loosening in recent years, the report stated.

” Solid growth in the Philippines was underpinned by the government’s infrastructure drive. This dynamic will likely be maintained going forward as part of President Rodrigo Duterte’s plan to spend USD 180 billion to overhaul dilapidated roads, bridges, railways and airports.

In addition, private consumption was supported by buoyant remittances and a tight labor market. On the flipside, the construction push is raising capital imports, moderating some of the growth impetus and causing the current account deficit to widen”.

In Malaysia, growth moderated for the second consecutive quarter but remained solid, underpinned by resilient private consumption. However, private investment was likely dampened by pre-election jitters. Economic uncertainty has only deepened following the outcome of the vote, which saw the incumbent Barisan Nasional party ousted and the Pakatan Harapan coalition winning a majority in parliament. The economic impact of the result is still uncertain.

While the announced abolition of the Goods and Services tax and the possible reintroduction of subsidies would likely boost private spending, such moves could generate concerns over fiscal discipline and dampen business investment. A review of public procurement could hamper government spending in the near term, economists at mparatives following a surge in exports last year.

 FocusEconomics noted.

Available indicators for April, although limited, point to a solid start to Q2. Manufacturing purchasing managers indices (PMIs) were firmly in positive territory in virtually all countries, with the indicator rising to a near two-year high in Indonesia.

Outlook

” Economic growth should remain robust going forward, as the region continues to benefit from resilient domestic demand. Public infrastructure investment in key economies such as Indonesia and Philippines will support growth, while strong labor markets bode well for private consumption”.

On the downside, external sectors are likely to soften, as export growth eases after a stellar performance in 2017, and tighter financial conditions weigh on activity, the report released by

 FocusEconomics.

In addition, a possible escalation of trade tensions between the U.S. and China would hit the generally open economies of ASEAN hard, particularly given the importance of both countries as key export markets.

GDP growth for the region is expected to come in at 5.1% this year, which is unchanged from last month’s estimate and only slightly below the 5.2% expansion recorded last year.

The stable 2018 GDP estimate for this month reflects steady growth projections for virtually all of the economies surveyed in the ASEAN region, including Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

The economies of Brunei and Myanmar are projected to expand less than estimated last month. For 2019, FocusEconomics panel sees growth stable at 5.1%. Despite this month’s downgrade, the panel still projects Myanmar will be the fastest-growing economy in the region, with a 7.1% increase expected in 2018. Conversely, Brunei is foreseen logging the weakest expansion this year, at 1.4%.

Among the major economies in the region, the Philippines will record the fastest increase, followed by Indonesia and Malaysia.

African Eye Report

Leave a Reply

*