Economic Research | 4 April 2018 | |||
ASEAN | ||||
Regional Economic Outlook | ||||
So Far, So Good…But Risks Are Increasing · The global economic expansion remains in place, but a turning point could be near. · For the ASEAN region, this means that export growth is still strong – but there are a few clouds on the horizon. · ASEAN exports should get a near-term boost from rising capex abroad. However, base effects and some growth moderation abroad foretell a slowdown. · The growth story in ASEAN would depend on how well the external pick-up of 2017 translates into domestic demand in 2018 – on which, we are optimistic. · The three biggest risks come from the US. The first is the possibility that inflation – while currently low – may not stay that way for very long. The US Federal Reserve (Fed) may raise rates by more than expected. This forms our base case. · If this happens, the USD is likely to be stronger than what the consensus believes – and the equity markets would face a significant downside risk. · In any case, volatility in the markets is back and is here to stay. · In ASEAN, the adjustment will come, in part, in the form of rate increases and from currency weakness. In Malaysia and Singapore, we expect both scenarios to happen. In Thailand and Indonesia, however, rates are unlikely to rise. · The second risk is the US’ policy on trade. A trade war between the world’s two largest economies will have no winners. In fact, it may stymie economic recovery, and all asset classes are likely to suffer. · ASEAN economies face significant exposure through their place in value chains. · The third risk is geo-political in nature, and involves possible action by the US against North Korea. While this is one of the risks that is typically stated in economic reports, tensions are currently higher than usual and – given the unpredictability of the countries’ leaders involved – we cannot rule out the possibility of a confrontation taking place. Arup Raha | +65 6232 3896 | ||||
To access our recent reports please click on the links below: 23 Mar: Other People’s Wars And Value Chains 05 Feb: Looking West - As The US Sneezes 18 Jan: Making The USD Great Again | ||||
Economics Team | ||||
Arup Raha | Group Chief Economist | +65 6232 3896 | ||
Peck Boon Soon | Chief ASEAN Economist | +603 9280 2163 | ||
Vincent Loo Yeong Hong | Malaysia, Vietnam | +603 9280 2172 | ||
Rizki Fajar | Indonesia, Philippines | +6221 2970 7065 | ||
Aris Nazman Maslan | Malaysia, Vietnam | +603 9280 2184 | ||
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