South­east Asia re­silient as In­done­sia out­per­forms

The Pak Banker - - Front Page -

JAKARTA

South­east Asia is emerg­ing re­silient from a pe­riod of global tur­moil, with ris­ing in­vest­ment and do­mes­tic con­sump­tion that will pro­pel growth in com­ing years, the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment said.

In­done­sia’s growth will av­er­age 6.4 per­cent from 2013 to 2017, the OECD es­ti­mated in a re­port yes­ter­day, equal to that recorded in the two decades be­fore the 1997 Asian fi­nan­cial cri­sis. The Philippines will ex­pand about 5.5 per­cent a year, the OECD said, up from 5 per­cent in the decade through 2012, ac­cord­ing to In­ter­na­tional Mone­tary Fund data. Malaysia and Thai­land will see gains of about 5.1 per­cent, the OECD pre­dicted.

The out­look un­der­scores Pres­i­dent Barack Obama’s aim to strengthen U.S. trade ties with the re­gion as its mid­dle class swells. Obama to­day makes the first visit by a sit­ting Amer­i­can leader to Myan­mar, a na­tion of 55 mil­lion peo­ple whose eco­nomic open­ing also shows the po­ten­tial for com­pa­nies from more in­dus­trial South­east Asian nations to build scale within the re­gion.

“Pol­icy mak­ers have been very ac­tive in pro­vid­ing sup­port to boost do­mes­tic de­mand to counter sub­par growth in the re­gion’s big­ger ex­port mar­kets,” said Euben Paracuelles, a Sin­ga­pore-based econ­o­mist at No­mura Hold­ings Inc. “We’re also see­ing fis­cal pol­icy be­ing used ag­gres­sively as stim­u­lus.” Af­ter Myan­mar, Obama is meet­ing lead­ers of the As­so­ci­a­tion of South­east Asian Nations to­day in Cam­bo­dia for a sum­mit to dis­cuss eco­nomic and se­cu­rity is­sues. Asean lead­ers are set to start talks on a re­gional trade agree­ment with China, Ja­pan, In­dia, South Korea, Aus­tralia and New Zealand, an area with more than 3 bil­lion peo­ple rep­re­sent­ing a quar­ter of the world econ­omy.

Thai­land’s growth in the third quar­ter matched the me­dian of economists’ es­ti­mates. Gross do­mes­tic prod­uct in­creased 3 per­cent in the three months through Septem­ber from a year ear­lier, af­ter a re­vised 4.4 per­cent ex­pan­sion in the pre­vi­ous quar­ter, the Na­tional Eco­nomic and So­cial De­vel­op­ment Board said in Bangkok to­day. Prime Min­is­ter Yingluck Shi­nawa­tra has boosted spend­ing and raised salaries as the na­tion re­cov­ers from the worst floods in al­most 70 years.

Asian stocks in­creased, with the MSCI Asia Pa­cific In­dex 1.1 per­cent higher at 12:48 p.m. in Tokyo. Oil in­creased 0.8 per­cent in New York, and South Korea’s won strength­ened 0.5 per­cent against the dol­lar.

Europe’s sov­er­eign debt cri­sis and a slow­down in ad­vanced economies have had a “lim­ited” im­pact on South­east Asian nations with most of the ef­fect ex­pe­ri­enced through trade, the Paris-based OECD said in its re­port re­leased in Phnom Penh yes­ter­day. The re­gion, along with China, may face risks stem­ming from volatil­ity of cap­i­tal in­flows in the medium term, it said.

The prospects for de­vel­op­ing Asian nations con­trast with the fis­cal and de­mo­graphic chal­lenges faced by more ad­vanced economies, as higher pub­lic spend­ing and younger pop­u­la­tions sup­port do­mes­tic de­mand and lure in­vest­ment even as global ex­pan­sion weak­ens.

In­creased gov­ern­ment ex­pen­di­tures on so­cial safety nets and health will en­cour­age house­hold spend­ing and re­duce the need for pre­cau­tion­ary sav­ings in emerg­ing Asia, ac­cord­ing to the re­port.

“A com­bi­na­tion of cycli­cal fac­tors, gov­ern­ment poli­cies, and longer-term shifts in eco­nomic struc­ture that have sup­ported con­sump­tion growth over the past sev­eral years are likely to continue to un­der­pin its growth over the medium term in South­east Asia, China and In­dia,” the OECD said in its 2013 out­look for the re­gion.

Gov­ern­ments in South­east Asia have loos­ened fis­cal poli­cies to spur growth. Philip­pine Pres­i­dent Benigno Aquino is in­creas­ing spend­ing to a record and seek­ing more than $16 bil­lion of in­vest­ments in roads and air­ports, while Malaysian Prime Min­is­ter Na­jib Razak is also boost­ing out­lays. The re­gion’s growth prospects are help­ing at­tract over­seas com­pa­nies, with Ja­pan’s for­eign-di­rect in­vest­ment in South­east Asia sur­pass­ing that in China, ac­cord­ing to the Ja­pan Ex­ter­nal Trade Or­ga­ni­za­tion’s fig­ures us­ing fi­nance min­istry data. Ja­pan’s in­vest­ment in the As­so­ci­a­tion of South­east Asian Nations more than dou­bled to $19.6 bil­lion in 2011 from the pre­vi­ous year, while that in China was $12.6 bil­lion.

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