ASEAN economies to enjoy positive growth in 2018

ASEAN: Goodbye 2017

2017 has been a very joyous year for Southeast Asian countries and businesses invested in the region. Almost all ASEAN countries had experienced a much better turnout in their economy last year, with both Vietnam and Philippine economy experiencing the highest growth at above 6 percent.

Malaysia, Thailand and Singapore also saw a turnaround in its economy. Contrary to expectations, GDP for the third quarter in the three Southeast Asian countries had experienced high growth – with growth rates recorded to be higher than any time since 2014 and earlier.

Moving to 2018

Continuing from 2017’s momentum, ASEAN is expected to see most of its top six economies maintaining this progress. According to the median forecasts of economists surveyed by Bloomberg, the Vietnam and Philippine economy is expected to once again become the region’s best performing economies in 2018 – with economic growth surpassing 6 percent. Indonesia’s GDP is anticipated to achieve a slight increase in 2018 at 0.2% – increasing from 5.1% to 5.3%.

Unlike how the previous year saw growth in ASEAN expanding at a rapid pace, this year will see an albeit steadier growth rate. Economic development will also be seen extending to industries other than trade-dominated ones – such as manufacturing – in the upcoming year.

4 areas to watch out for this year

But before you start on making major business decisions for 2018, there are 4 sectors that you should take note of.

1. Rising tax

Southeast Asian countries – namely Indonesia and the Philippine economy – depending on their domestic economy for the nation’s growth are seen to have an increase in expenditure on their infrastructure projects. These include road, rail and port projects.

Consequently, authorities in these ASEAN countries have been strengthening its efforts on increasing revenue from taxes to maintain its budget deficit. The Philippines has recently passed a new tax bill where it cut down income taxes and imposed higher tax on coal. Indonesia has also been stepping up its efforts to catch tax dodgers.

2. Readjustment of interest rates

The Central Banks of Malaysia and Philippine economy are predicted to increase their interest rates this year. Similarly, Singapore may possibly step away from its neutral policy stance, depending on the policy change it will make during the Monetary Authority of Singapore (MAS) meeting this coming April and October.

Contrariwise, it is uncertain what action Indonesia and Thailand will be taking for this year, with economists from Morgan Stanley and Credit Suisse giving different predictions for the two Southeast Asian countries.

3. Increase in investment

With an upturn in trade for 2017, investments are expected to rise this year as global demand prospects improve – with projects under China’s Belt and Road Initiative potentially further boosting it.

4. Political risks

These two years will see several ASEAN countries gearing up for their elections. For Thailand, while the general election is expected to take place this November, there are doubts to whether or not it will take place. Indonesia is also expected to hold its elections in 2019, which may potentially boost the ASEAN country’s overall spending and consumers’ purchasing power.

Based on a study by Google and Temasek Holdings, ASEAN is forecasted to have its digital economy reach $240 billion by 2025 due to strong growth in all sectors.
Thailand’s economic growth falls in Q3 as Thailand tourism and exports drops. But, political campaign spendings are expected to temporarily boost the economy.
The US-China trade war are causing companies to move their production sites to Southeast Asia, allowing ASEAN to see a higher inflow of foreign direct investment.
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