S-E Asia economies to see mild 4.9pc expansion

KUALA LUMPUR: Southeast Asia economies are expected to experience milder growth this year despite a solid start to the year, according to ICAEW’s latest Economic Insight: Southeast Asia report.

The report revealed that growth in the region was forecast to come in at 4.9 per cent from 5.3 per cent last year, resulting from a moderate export growth across the region from the sharp acceleration.

ICAEW economic adviser and Oxford economics lead Asia economist Sian Fenner said export growth across the region was expected to ease from a strong performance recorded last year, reflecting softer Chinese import demand and a normalisation in the global electronics cycle.

“The slowdown is expected to be broad-based, with only Indonesia growing faster,” said Fenner in a statement yesterday.

Unlike the United States and Europe, she said Asia had a promising start to the year, with Southeast Asia economies expanding 5.2 per cent year-onyear, slightly softer than 5.3 per cent in the previous quarter.

Fenner said growth in Malaysia was expected to remain above the average for 2012 to 2016, while Singapore and the Philippines recorded an acceleration in gross domestic product (GDP) at the start of this year.

She said export growth outlook remained positive and improving labour market conditions and rising wages in many Southeast Asian economies would bode well for consumption.

“The momentum from a solid recovery in private investment (excluding construction) across most of Southeast Asia last year was expected to have spilled over into this year,” she added.

Fenner said an exception to the “cautious” outlook for investment in Malaysia was in reference to the recent election win by Tun Dr Mahathir Mohamad’s coalition party and planned review of all major infrastructure projects.

She said a slump in global trade was unlikely, notwithstanding the downside risk from US-China trade frictions.

ICAEW regional director Southeast Asia Mark Billington said it was likely that tariff imposition would be contained and greater intra-regional trade and the increase in domestic demand’s contribution to GDP would protect Asia’s growth to some extent.

Meanwhile, he said most Southeast Asia central banks had started tightening monetary policy, which in turn would lead to higher debt servicing costs.

“However, interest rates would need to rise at a much faster pace than our current projections for debt to meaningfully damage growth across the region.”