Trends driving economies in the first quarter of the year set to firm up, analysts say
Southeast Asia is on track to recover from nearly two years of slump as greater mobility, reopening of borders and increased exports are expected to support economic growth for the rest of the year, according to analysts.
The region’s largest economies – Indonesia, Thailand and Malaysia – all recorded higher growth in the first quarter. Vaccination programs against COVID-19 and the easing of social restrictions have boosted consumer spending and supported GDP expansion. These three countries are also among the world’s leading exporters of commodities and have benefited from the rise in commodity prices caused by the Russian-Ukrainian conflict.
Indonesia, Southeast Asia’s largest economy, posted 5.01 percent year-on-year growth in the first quarter. The Asian Development Bank’s country director for Indonesia, Jiro Tominaga, said the Indonesian economy “bounced back strongly” from the slowdown in the third quarter and ended 2021 with higher output than before the pandemic. 2019.
“Growth has been broad-based and is expected to strengthen in 2022 as economic activity continues to normalize,” Tominaga said in a statement.
Thailand’s economy grew 2.2% in the first quarter, while Malaysia’s GDP grew 5%.
Siriwan Chutikamoltham, a senior lecturer at the Nanyang Business School at Nanyang Technological University in Singapore, said Southeast Asia “could rebound relatively quickly” after its borders reopen.
In an interview with China Daily, Siriwan said the region has several “growth factors” that would support its economic rebound. These include a younger population that has better immunity to COVID-19, and the rise of more digitally savvy consumers and online businesses.
In the Philippines, first-quarter GDP rose 8.3% as a 10.1% rise in household spending fueled the consumer-driven economy. Robert Dan Roces, assistant vice president and economist at Manila-based Security Bank Corp, said the country’s economy had received “a strong boost from revenge spending, which has led to huge gains in transport, leisure and catering services”.
While inflation may dampen private consumption, he does not see “a regression to a negative trajectory for growth.” The election of a new chairman on May 9 should also affect the growth trajectory, with Roces noting that the composition of the new economic leadership team “will be crucial in particular for the markets”. President-elect Ferdinand Marcos Jr has yet to announce his cabinet members.
In Singapore, the region’s business and trade hub, the economy grew 3.4% in the first quarter, according to preliminary estimates from the Ministry of Trade and Industry. The ministry cited the electronics and precision engineering industry, which continued to record strong output growth on the back of strong global demand for semiconductors.
The AfDB has forecast 4.9% growth in Southeast Asia this year. He noted the expansion of the manufacturing sector and the increase in mobility. The bank sees two “divergent growth scenarios” for the region, with sustained growth expected for Indonesia, Malaysia, the Philippines and Singapore. He has “less rosy growth expectations” for Brunei, Cambodia, Laos, Thailand and Vietnam, as these countries are more dependent on tourism, their progress in vaccination has been relatively slow or their manufacturing has been hardest hit by the spread of COVID-19.
The reopening of borders may have brought relief to the region’s travel and tourism industry, among the hardest hit by the closures and movement restrictions. But the AfDB noted that travel remains restricted and social distancing is enforced.
Traveling remains cumbersome as people must provide proof of vaccination and undergo testing before they can travel. Some countries also require incoming travelers to quarantine for a few days.
Alicia Garcia Herrero, chief economist for Asia-Pacific at French investment bank Natixis, said growth expectations in the region will be hampered by three factors: higher inflation and supply chain disruptions. supply that can pinch consumers’ disposable income; higher interest rates as monetary policy reacts; and decline in external demand.