Region's 2019 growth 'set to ease to 4.5%'

Forecaster Oxford Economics flags global headwinds and US-China trade uncertainty

Economic growth in the region is tipped to ease this year amid a fresh round of tariffs and trade restrictions by the United States and China, a report noted yesterday.

British advisory firm Oxford Economics has forecast expansion to ease to 4.5 per cent this year from 5.1 per cent last year, before stabilising at 4.5 per cent next year.

The quarterly report, which was commissioned by the Institute of Chartered Accountants in England and Wales (ICAEW), focused on Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Oxford Economics is ICAEW's partner and economic forecaster.

"Amid ongoing global headwinds and uncertainty around the outcome of US-China trade talks, we expect to see a further deterioration in economic prospects across the region," said Ms Sian Fenner, ICAEW economic adviser and Oxford Economics' lead Asia economist.

Mr Mark Billington, ICAEW regional director for Greater China and South-east Asia, noted that the trade outlook will vary across economies in the region, with growth set to stay below potential in Indonesia, the Philippines and Thailand, while Singapore braces itself for the hardest hit.

Overall gross domestic product (GDP) growth across the region slowed to 4 per cent in the first half of the year from 4.5 per cent in the second half of last year due to the trade war, slower Chinese domestic demand and a downturn in the global electronics cycle, the report stated.

Slower export momentum has also weighed heavily on trade-dependent economies, such as Singapore, Thailand and the Philippines, but Malaysia and Vietnam have outperformed, with a more modest deceleration in export growth and resilient domestic demand.

Central banks in South-east Asia are expected to reduce interest rates in order to boost domestic demand, the report noted.

The central banks of Indonesia and the Philippines are forecast to cut rates again before Dec 31, after cuts of 50 basis points earlier this year. Thailand and Malaysia are expected to lower rates by at least 25 basis points by early next year.

The Monetary Authority of Singapore is expected to ease policy next month, shifting to a zero-appreciation bias in a trade-weighted basket of currencies.

Singapore is forecast to dip into a manufacturing-led technical recession - two consecutive quarters of negative growth - this quarter.

Elsewhere, Vietnam is set to continue outperforming the rest of South-east Asia thanks to positive trade diversion effects.

However, if the US imposes higher import tariffs on Vietnam, its GDP growth is likely to dip, the report noted.

A version of this article appeared in the print edition of The Straits Times on September 20, 2019, with the headline 'Region's 2019 growth 'set to ease to 4.5%''. Print Edition | Subscribe