Asean seen to remain resilient in 2020

MANILA, Philippines — Growth in ASEAN economies is expected to remain resilient in 2020, buoyed by strong domestic demand, according to market intelligence firm IHS Markit. 

In a report, IHS Markit said a number of drivers would support growth momentum in the region as it faces risks from the prevailing US-China trade war. 

“Although the export sectors of many ASEAN countries were hit by the contagion effects of the US-China trade war this year, as well as the downturn in the global electronics sector, overall ASEAN economic growth momentum remained resilient, underpinned by the strength of domestic demand,” IHS Markit said. 

“The outlook for 2020 is for continued resilient economic expansion in the ASEAN region, despite the headwinds to the export sector. A number of key drivers will support economic growth momentum in 2020,” the report said. 

IHS Markit said the significant decline in world oil prices since May has helped to reduce inflationary pressures, allowing a number of ASEAN central banks to ease monetary policy, including Bank Indonesia, Bank of Thailand, Bank Negara Malaysia and Bangko Sentral ng Pilipinas. 

The impact of these monetary policy stimulus measures is expected to continue to support growth in 2020. 

IHS Markit said many ASEAN governments also continue to boost spending on infrastructure programs, such as the Build Build Build policy that is ramping up infrastructure construction in the Philippines.

Rapidly rising household incomes in some of the most populous ASEAN nations such as Indonesia, Vietnam and the Philippines are helping drive strong growth in consumer spending in these economies, which is expected to continue in 2020.

A key risk to ASEAN’s economic outlook is seen to come from the ongoing US-China trade war, according to the report. 

“A significant risk to the 2020 economic outlook would be from a further escalation of bilateral tariff measures if a comprehensive trade deal cannot be reached. This could further dent China’s growth rate and reduce China’s manufacturing exports in 2020, which would result in further significant negative transmission shock waves to the East Asian manufacturing supply chain,” IHS Markit said. 

Major ASEAN export manufacturing hubs such as Singapore, Malaysia and Thailand would be vulnerable to such a shock, according to the report.

Many ASEAN economies are also still vulnerable to the current slowdown evident in global electronics demand, due to the importance of the electronics industry for their exports and industrial production.