Report: South-east Asia’s economic outlook brightening
26 Jul 2023
South-east Asia’s economic prospects continue to stand out in a world faced with high inflation and soft demand, according to Nikkei Asia.
According to Vietnam news agency (VNA), an article published by the Tokyo-based newspaper on July 25 cited HSBC forecast that the six largest economies in South-east Asia ― Indonesia, Thailand, Malaysia, the Philippines, Singapore, and Vietnam ― will grow 4.2 per cent this year and 4.8 per cent next year,
This pace would far outstrip the 1.1 per cent expansion expected in the developed world in 2023 or next year’s estimated 0.7 per cent.
This acceleration is all the more remarkable given that inflows of Chinese tourism money have not returned to South-east Asia as anticipated.
A recovery in tourism would certainly be a welcome boon for South-east Asia. But meanwhile, trade, the transition to net zero, and digital transformation are set to power the region’s economic growth for decades to come and ensure that this dynamic region remains a global growth engine.
The article also noted that South-east Asia has come a long way as a manufacturing dynamo. It now accounts for 8 per cent of the global exports and, since 2020, has surpassed the European Union as China’s largest trading partner.
The region is benefiting from a restructuring of global supply chains as it sits at the crossroads of two of the world’s largest free trade agreements, the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), VNA reported.
According to a recent HSBC survey, Asia-Pacific companies plan to base 24.4 per cent of their supply chains in South-east Asia over the next one to two years, up from 21.4 per cent as of 2020.
As more companies diversify and adopt a “China+1” production strategy, South-east Asia will continue to gain market share. More global foreign direct investment will be directed toward the region as the centre of gravity of global manufacturing continues to shift.
The transition to net zero is a second structural trend that is bringing tremendous opportunities as South-east Asia races to “green its grid”, the article noted.
Most of the energy powering South-east Asia comes from fossil fuels, so it is encouraging that Indonesia and Vietnam ― two of the region’s most dynamic economies as well as two of the world’s top coal-burning countries ― have each announced Just Energy Transition Partnerships with the Group of Seven and other developed nations.
Under this new funding model, tens of billions of dollars in public and private finance will be mobilised, catalysing the decarbonisation of the two countries’ power sectors and facilitating their clean energy transition.
The third long-term source of optimism about South-east Asia is the digital transformation of the region’s economy, it added.
South-east Asia already has a vibrant digital economy, which was worth nearly US$200 billion (RM911 billion) as of last year and is expected to surpass US$300 billion in size by 2025. Add in an internet-connected population of 460 million, and it is evident why companies are transforming their business models to cater to changing customer behaviour.
As an economic engine with favourable demographics, South-east Asia is well positioned to capture the opportunities stemming from these long-term trends, the article read.