Southeast Asia on the way to economic recovery: ADB
Southeast Asia is entering a recovery phase from the Covid-19 pandemic, mainly helped by improving exports as the global economy is gradually strengthening, the Asian Development Bank (ADB) suggests in its latest economic outlook for the region.
The promotional bank for developing Asia forecasts a 5.1-per cent rise in gross domestic product for Southeast Asia this year.
The outlook is up from the three per cent estimate for 2021, when Covid-19 shut down regional factories during the summer and caused extensive restrictions for businesses, contributing to global supply chain turmoil and substantial economic damage in the region.
Meanwhile, manufacturing is back on track and exports are soaring in some of the region’s largest economies. Malaysia’s exports jumped 32 per cent annually as of November to 112.2 billion ringgit ($26.9 billion) after breaking a monthly record in October. Trade data shows strong growth in electrical and electronic products, which make up nearly 40 per cent of the total, as well as petroleum products and chemicals.
Strong export growth in SIngapore
Singapore’s exports rose 24.2 per cent in November, the largest gain in about a decade. The city state’s non-oil domestic exports rose by 18.4 per cent year-on-year in December 2021, marking the 13th straight month of growth, mainly driven by electronic products, pharmaceuticals, specialised machinery and petrochemicals.
Overall, growing vaccination rates and a decline in hospitalisations have enabled a return to a near-normal economic activity in many countries.
Analysts also expect that the risk of any further lockdowns will be lower than last year as governments adapt to a “new normal” situation and regional countries are learning to live with Covid-19 as a smaller threat.
Rate hikes in largest regional economies expected
Singapore-based United Overseas Bank predicts rate hikes in Indonesia, Malaysia, the Philippines and Thailand this year. In Indonesia, the bank expects four increases during the second half of the year. The anticipations are based on likely interest rate hikes in advanced economies after the US Federal Reserve has signaled that it expects three hikes in 2022, and the Bank of England announced an increase in December.
However, if higher rates make investments in these developed markets more attractive, capital may flow there from Southeast Asia, putting downward pressure on currencies in the region. That could drive up import prices, which – in turn – would stoke inflation and hamper consumer spending, the ADB said in its outlook.
Tourism has yet to rebound
In addition, the sluggish recovery of the tourism industry in Southeast Asia could potentially offset some of the benefits of rising exports this year. Regional borders are opening slowly for international tourists and it seems that the reopening efforts are not aligned across the region and are lacking coordination and cooperation, which is confusing tourists. In most countries, there are still strict Covid-19 regulations to follow and a lot of entry paperwork to handle which doesn’t come in handy for many visitors either.
[caption id="attachment_38193" align="alignleft" width="300"] Singapore's container port has become busy again[/caption] Southeast Asia is entering a recovery phase from the Covid-19 pandemic, mainly helped by improving exports as the global economy is gradually strengthening, the Asian Development Bank (ADB) suggests in its latest economic outlook for the region. The promotional bank for developing Asia forecasts a 5.1-per cent rise in gross domestic product for Southeast Asia this year. The outlook is up from the three per cent estimate for 2021, when Covid-19 shut down regional factories during the summer and caused extensive restrictions for businesses, contributing to global supply chain...
Southeast Asia is entering a recovery phase from the Covid-19 pandemic, mainly helped by improving exports as the global economy is gradually strengthening, the Asian Development Bank (ADB) suggests in its latest economic outlook for the region.
The promotional bank for developing Asia forecasts a 5.1-per cent rise in gross domestic product for Southeast Asia this year.
The outlook is up from the three per cent estimate for 2021, when Covid-19 shut down regional factories during the summer and caused extensive restrictions for businesses, contributing to global supply chain turmoil and substantial economic damage in the region.
Meanwhile, manufacturing is back on track and exports are soaring in some of the region’s largest economies. Malaysia’s exports jumped 32 per cent annually as of November to 112.2 billion ringgit ($26.9 billion) after breaking a monthly record in October. Trade data shows strong growth in electrical and electronic products, which make up nearly 40 per cent of the total, as well as petroleum products and chemicals.
Strong export growth in SIngapore
Singapore’s exports rose 24.2 per cent in November, the largest gain in about a decade. The city state’s non-oil domestic exports rose by 18.4 per cent year-on-year in December 2021, marking the 13th straight month of growth, mainly driven by electronic products, pharmaceuticals, specialised machinery and petrochemicals.
Overall, growing vaccination rates and a decline in hospitalisations have enabled a return to a near-normal economic activity in many countries.
Analysts also expect that the risk of any further lockdowns will be lower than last year as governments adapt to a “new normal” situation and regional countries are learning to live with Covid-19 as a smaller threat.
Rate hikes in largest regional economies expected
Singapore-based United Overseas Bank predicts rate hikes in Indonesia, Malaysia, the Philippines and Thailand this year. In Indonesia, the bank expects four increases during the second half of the year. The anticipations are based on likely interest rate hikes in advanced economies after the US Federal Reserve has signaled that it expects three hikes in 2022, and the Bank of England announced an increase in December.
However, if higher rates make investments in these developed markets more attractive, capital may flow there from Southeast Asia, putting downward pressure on currencies in the region. That could drive up import prices, which – in turn – would stoke inflation and hamper consumer spending, the ADB said in its outlook.
Tourism has yet to rebound
In addition, the sluggish recovery of the tourism industry in Southeast Asia could potentially offset some of the benefits of rising exports this year. Regional borders are opening slowly for international tourists and it seems that the reopening efforts are not aligned across the region and are lacking coordination and cooperation, which is confusing tourists. In most countries, there are still strict Covid-19 regulations to follow and a lot of entry paperwork to handle which doesn’t come in handy for many visitors either.
