This photo taken on May 10, 2022 shows a general view of Manila from the business district of Makati. (CHAIDEER MAHYUDDIN / AFP)
Southeast Asia is on track to recover from nearly two years of recession, as increased mobility, border reopening and increased exports are seen supporting economic growth for the rest of the year, analysts said.
The region’s largest economies – Indonesia, Thailand and Malaysia – have all posted higher growth in the first quarter. Vaccination programs and easing social restrictions have boosted consumer spending and supported GDP expansion. These three countries are also among the world’s key commodity exporters and have benefited from increased commodity prices caused by the Russia-Ukraine conflict.
Siriwan Chutikamoltham, senior lecturer at Nanyang Business School, at Singapore’s Nanyang Technological University, said SE Asia has several “growth factors” that will support economic rebound. These include a young population that has better immunity against COVID-19, and the rise of more digital-savvy consumers and online business
Indonesia, Southeast Asia’s biggest economy, posted 5.01 percent year-on-year growth in the first quarter. ADB Country Director for Indonesia Jiro Tominaga said the Indonesian economy “briskly rebounded” from the downturn in the third quarter and ended 2021 with output higher than in pre-pandemic 2019.
“Growth was broad-based and should strengthen in 2022 as economic activity continues to normalize,” Tominaga said in a statement.
The Thai economy expanded by 2.2 percent in the first quarter, while Malaysia’s GDP grew 5.0 percent.
Siriwan Chutikamoltham, senior lecturer at Nanyang Business School, at Singapore’s Nanyang Technological University (NTU), said Southeast Asia “could bounce back relatively fast” following the reopening of its borders.
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In an interview with China Daily, Siriwan said the region has several “growth factors” that will support economic rebound. These include a young population that has better immunity against COVID-19, and the rise of more digital-savvy consumers and online business.
In the Philippines, first-quarter GDP grew 8.3 percent as a 10.1 percent spike in household spending powered the consumption-based economy. Robert Dan Roces, assistant vice-president and economist at Manila-based Security Bank Corp, said the nation’s economy enjoyed “a hefty boost from revenge spending, so this pushed sizable gains in transport, recreation and food services”.
Boats travel along the Chao Phraya River as the sun sets in Bangkok, Thailand on April 4, 2022. (JACK TAYLOR / AFP)
While inflation may dampen private consumption, he does not see “a regression toward a negative path for growth”. The May 9 election of a new president is also seen affecting the growth trajectory, with Roces noting the composition of the new economic management team “will be crucial notably for the markets”. Presumptive President Ferdinand Marcos Jr is yet to announce the members of his cabinet.
In Singapore, the region’s business and trade hub, the economy grew 3.4 percent in the first quarter, according to advance estimates by the Ministry of Trade and Industry. The ministry cited the electronics and precision engineering industry which continued to record strong output growth thanks to strong global demand for semiconductors.
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The Asian Development Bank has forecast Southeast Asia’s growth at 4.9 percent this year. It noted the expansion in the manufacturing sector and increased mobility.
The ADB sees two “diverging growth scenarios” for the region, with buoyant growth expected for Indonesia, Malaysia, the Philippines and Singapore.
It has “less rosy growth expectations” for Brunei, Cambodia, Laos, Thailand and Vietnam as these countries are more dependent on tourism, their vaccination progress has been relatively slow, or their manufacturing has been hit harder by the spread of COVID-19.
A woman carries an infant upon arrival from Jakarta after landing at Kuala Lumpur International Airport 2 (KLIA 2), as Malaysia reopened its borders for travelers fully vaccinated against the coronavirus, in Sepang on April 1, 2022. (MOHD RASFAN / AFP)
The reopening of borders may have provided relief to the region’s travel and tourism industry – one of the worst hit by lockdowns and movement restrictions. But the ADB noted that travel remains curtailed and social distancing is enforced.
The Asian Development Bank has forecast Southeast Asia’s growth at 4.9 percent this year. It noted the expansion in the manufacturing sector and increased mobility
Traveling remains cumbersome as people need to provide proof of vaccination and undergo tests before they can travel. Some countries also require incoming travelers to quarantine for a few days.
Siriwan, of NTU, said the region’s travel sector also depends on China, one of the biggest sources of tourists for Southeast Asia.
“As long as (China continues to impose) a zero-COVID policy, it is hard for tourism in Southeast Asia to recover,” she said.
Alicia Garcia Herrero, chief economist for Asia-Pacific at French investment bank Natixis, said China’s zero-COVID policy will also affect countries that are “highly dependent” on the Chinese export market.
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The commodity exporting countries may have gained from higher prices caused by the Russia-Ukraine conflict, but this will also lead to inflation that can hurt the pace of growth.
Garcia Herrero said growth expectations in the region will be hampered by three factors: higher inflation and supply chain disruption that can pinch consumers’ disposable income; higher interest rates as monetary policy reacts; and lower external demand.