Stronger-than-expected growth in some Southeast Asian economies has sparked optimism the worst of a slowdown might be over, but high debt and weak exports make sustaining the momentum a challenge for policymakers as US interest rates go up.
The Philippines wrapped up the region’s third-quarter GDP performance on Thursday with annual growth of 6 percent, up from 5.8 percent in the second quarter.
Annual growth also picked up in Indonesia and Thailand, the region’s two largest economies, taking weighted average growth in the region of some 500 million people with a combined GDP of US$2.2 trillion to 4.2 percent, according to Capital Economics.
Officials from Bangkok to Jakarta have been quick to seize on the improved growth numbers and consumer confidence as evidence the worst slowdown since the 2009 crisis is over. However, economists and businesses hold a less sanguine view.
China’s slowdown and recession in Japan, both leading markets for the region, high consumer and corporate debt at home and the risk of more market ructions when the US raises interest rates, are all clouding prospects ahead.
“It’s too early to call a trough,” said Joseph Incalcaterra, an economist at HSBC in Singapore. “We forecast growth in the fourth quarter to be weaker just about everywhere.”
Economic growth has been deceptively underpinned by a fall in imports rather than strength in exports for some countries.
Indonesia’s exports in the third quarter fell 0.7 percent from a year earlier, but external demand still contributed 1.2 percentage points to the economy’s 4.7 percent growth as imports tumbled by 6.1 percent.
Sliding prices of commodities that account for around half of Indonesia’s total exports have crimped incomes and depressed domestic activity, in turn, hitting imports.
“From an accounting perspective, this gives the appearance that growth is stronger than it actually is,” Incalcaterra said.
In Thailand, the external sector’s large contribution to the economy’s 2.9 percent expansion was mostly due to a drop in imports, as investment shrank for the first time since early last year. Without the lift from net exports, Southeast Asia’s second-largest economy would have grown by just 0.1 percent.
Net exports dragged on Singapore’s performance, but it still grew 1.9 percent in the third quarter from a year earlier helped by spending on its 50th anniversary celebrations and a boost from inventories.
The data might show a growth pick-up in most of the major Southeast Asian economies, but exporters say there was no significant change in demand in the third quarter.
“We export to ASEAN countries and Australia and [demand in the] third quarter was still pretty flat,” said Sancoyo Antarikso, director at PT Unilever Indonesia Tbk, which exports consumer items such as shampoo and soap.
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