Member states of the Association of Southeast Asian Nations (ASEAN) are likely to record strong economic growth over the next couple of years, supported by robust domestic demand, and continue to outperform their peers in the rest of Asia, Capital Economics Asia Economist Gareth Leather said Wednesday.
Capital Economics, however, cautioned that weaker exports could weigh on demand in the coming quarters, and the current growth momentum could be hampered if global demand remains as weak as expected, prompting consumers to turn more cautious and investors to put their expansion plans on hold.
Among the Asian majors of Indonesia, Philippines, Thailand and Malaysia, which recorded the strongest growth in the region in the second quarter, Malaysia is the most trade-dependent, making it highly vulnerable to weak export demand. Nevertheless, generous pay increases for civil servants, cash handouts and other sweeteners ahead of next year's general election will support consumption, the firm said.
According to Leather, Philippines - though less exposed to global trends - is still vulnerable to weaker global growth due to its dependence on remittances. However, provided economic growth in the US, which accounts for 40 percent of Philippines' total remittances, holds up as expected, remittances will remain resilient and will continue to support the broader economy.
The economist noted that Thailand's second quarter growth was weaker as easy gains from the post-flood recovery had come through in the first quarter. However, the rebuilding of flood defences, combined with minimum wage hikes and a car buyer scheme, could support demand in the Thai economy.
Indonesia, which looks best placed to weather the global slowdown, is relatively well insulated from weaker export demand. With monetary policy set to remain loose, and investor and consumer confidence showing little sign of waning, Indonesia is set to record strong growth, the economist added.
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