Jul 10, 2018 - Philippines and Vietnam are doing best on the long-term drivers of economic ...... this year China has landed bombers on the Paracel Islands,.
SOUTH-EAST ASIA
PRESENTATION TO ICCBE 2018 THE INTERNATIONAL CONFERENCE OF COMMERCIAL BANK ECONOMISTS NEW YORK, 10TH JULY 2018
CORINNA
E C O NO M I C
ADVISORY
PTY LTD
South-East Asia is one of the world’s more populous regions – but not one of the world’s largest economic regions Population, 2018
GDP at purchasing power parities, 2018
Mns
1,500
30
1,250
25
1,000
20
750
15
500
10
250
5
0 China
India
Sub- MENA South Latin Saharan East America Africa Asia
EU
US
Russia Japan Other
25
0 China
EU
US
India
MENA
Latin South Japan Sub- Russia Other America East Saharan Asia Africa
GDP per capita at PPPs, 2018
GDP at market exchange rates, 2018
30
US$bn
US$bn
25
20
20
15
15
10
10
5
5
0
0 US
2
US$bn
EU
China
Latin Japan MENA South America East Asia
India
Sub- Russia Other Saharan Africa
China
EU
US
India
MENA
Latin South Japan Sub- Russia Other America East Saharan Asia Africa
Note: MENA (Middle East & North Africa) includes Afghanistan and Pakistan. Latin America excludes Cuba. Source: IMF, World Economic Outlook database, April 2018.
CORINNA ECONOMIC ADVISORY
South East Asia comprises a broad spread of large and small countries – and ‘advanced’ vs middle- and low-income developing economies Population, 2018
GDP at purchasing power parities, 2018
Mns
300
4.0 3.5
250
3.0
200
2.5
150
2.0 1.5
100
1.0
50
0.5
0 Indo- Philipnesia pines
Vietnam
Thai- Myan- Mal- Camland mar aysia bodia
Laos
Singa- Timor Brunei pore Leste
1.2
Indonesia
100 90 80 70 60 50 40 30 20 10 0
US$bn
1.0 0.8 0.6 0.4 0.2 0.0 Indo- Philipnesia pines
0.0
Thailand
Mal- Singaaysia pore
Viet- Myan- Camnam mar bodia
Source: IMF, World Economic Outlook database, April 2018.
Thailand
Mal- Philipaysia pines
Vietnam
Singa- Myan- Campore mar bodia
Laos
Brunei Timor Leste
GDP per capita at PPPs, 2018
GDP at market exchange rates, 2018
3
US$bn
Laos
Brunei Timor Leste
US$000s
SE Asia average
Singa- Brunei Malpore aysia
Thailand
Indo- Philipnesia pines
Laos
Viet- Myan- Timor Camnam mar Leste bodia
CORINNA ECONOMIC ADVISORY
There’s enormous diversity in the structure of South-East Asia’s economies Agriculture as a pc of GDP 30
Services as a pc of GDP 80
% of GDP, 2016
70
25
60
20
50
15
40 30
10
20
5
10
0
0 Cam- Myan- Laos bodia mar
Vietnam
Indo- Philip- Timor nesia pines Leste
Malaysia
Thailand
Brunei
Singapore
% of GDP, 2016
60 50 40 30 20 10 0 Timor Brunei IndoLeste nesia
4
Malaysia
Vietnam
Sing- Philipapore pines
Thailand
Malaysia
Laos
Vietnam
Indo- Cam- Brunei Myan- Timor nesia bodia mar Leste
Exports of goods and services as a pc of GDP
Industry as a pc of GDP 70
% of GDP, 2016
Thai- Myan- Laos land mar
Cam- Philip- Singbodia pines apore
200 180 160 140 120 100 80 60 40 20 0
% of GDP, 2016
na
Sing- Vietapore nam
Timor Leste
Thailand
Mal- Cam- Brunei Philip- Indo- Myan- Laos aysia bodia pines nesia mar
Note: ‘Industry’ includes oil and gas. Data for Timor-Leste are for 2015. Source: Asian Development Bank, Key Indicators for Asia and the Pacific, 2017.
CORINNA ECONOMIC ADVISORY
South-East Asian economies have grown faster than North-East Asian economies since the financial crisis – and this looks set to continue Real GDP growth, 2001-2018 10
GDP growth 2013-2017 and forecasts for 2018-2022
% change from year earlier
8 8
6
South-East Asia (ID, PH, TH, MY & SP)
% pa
2013-2017
7
2018-2022 (f)
6
5 4 4 2
0
3 North-East Asia (KO, TW & HK)
2 1
-2
0 -1
-4
-2 -6 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
5
Myan- Philipmar pines
Laos
Brunei Cambodia
Vietnam
Timor Leste
Indonesia
Malaysia
Thailand
Singa- Korea pore
Hong Taiwan Kong
Sources: National statistical agencies and/or central banks; IMF (for Myanmar and Cambodia). Forecasts for 2018-22 from IMF World Economic Outlook April 2018.
CORINNA ECONOMIC ADVISORY
Most South-East Asian economies have experienced steady growth in recent years, with Thailand and Singapore picking up most Real GDP growth, 2001-2018 20
20
% change from year earlier
18
18
18
16
16
16
14
14
12
12
12
10
10
10
8
Philippines
Singapore
8
Malaysia
14
6
4
4
4
2
2
2
0
0
0
-2
-2
-2
-4
-4
-4
-6
-6
-6
-8
-8
-8
-10
-10
-10
Indonesia
Thailand
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
% change from year earlier
Myanmar
8
6
6
6
20
% change from year earlier
Vietnam Cambodia
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Sources: National statistical agencies and/or central banks; IMF (for Myanmar and Cambodia).
CORINNA ECONOMIC ADVISORY
Unemployment rates have been steadily edging down in most South East Asian economies, other than Thailand and Malaysia Unemployment rates, 2001-2018 Thailand
Indonesia 12
% of labour force
7 6
10
3
3
4
2
2
2
1
0
0
14
0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Malaysia
Philippines % of labour force
1
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
% of labour force
4
4
6
6 5
5
8
16
% of labour force
Singapore
5
% of labour force
4
12
3
10 2
8
1
6
0
4 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
7
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Note: except for Singapore, unemployment rates are not seasonally adjusted. Sources: National statistical agencies.
CORINNA ECONOMIC ADVISORY
South-East Asian economic growth has owed surprisingly little to net exports Real GDP growth, 2001-2018 Indonesia 10
15
% pts
8
Domestic final demand
6
Vietnam
4 2 0 -2
Net exports
5
8
0
4
-5
0
% pts
Domestic final demand
5 0
16 12
Net exports
07 08 09 10 11 12 13 14 15 16 17 18
Domestic final demand
Net exports
-4 -8
07
08
09
10
11
12
13
14
15
16
17
% pts
07 08 09 10 11 12 13 14 15 16 17 18
18
Singapore Domestic final demand
16
8
4
4
0
0 Net exports
Domestic final demand
-4
-8
-8
-12
-12 07 08 09 10 11 12 13 14 15 16 17 18
% pts
12
8
-4
-5
8
Net exports
-10
% pts
12
Thailand
Philippines
-10
16
Domestic final demand
10
07 08 09 10 11 12 13 14 15 16 17 18
10
% pts
-15
-4
15
Malaysia
Net exports
07 08 09 10 11 12 13 14 15 16 17 18
Sources: National statistical agencies and/or central banks. Note that inventories contributed +3.1 pc pts to reported real GDP growth in Thailand over the year to Q1 2018, cf. -7.5 pc pts over the year to Q1 2016. Inventories subtracted 2.5 pc pts from real GDP growth in Malaysia over the year to Q1 2018.
CORINNA ECONOMIC ADVISORY
That’s because in most cases the upswing in exports has been paralleled by an increase in imports Merchandise exports and imports (US$ terms), 2001-2018 Vietnam
Indonesia 120 100
80
% change from year earlier (3-mth moving average)
60
80 40
Imports
20
Imports
20
-20
-20
Exports
-40
-40 -60
-60
Philippines % change from year earlier (3-mth moving average)
Imports
Imports
Exports
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Singapore
80
50
% change from year earlier (3-mth moving average)
40
Imports
20
20
Imports
10 0
0 -20
% change from year earlier (3-mth moving average)
30
40
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
% change from year earlier (3-mth moving average)
Thailand 60
Exports
60 50 40 30 20 10 0 -10 -20 -30 -40 -50
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
9
Exports
0
0
50 40 30 20 10 0 -10 -20 -30 -40 -50
% change from year earlier (3-mth moving average)
40
60
Malaysia
Exports
-10 -20
-40
-30
-60
-40 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Exports
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Sources: National statistical agencies and/or central banks.
CORINNA ECONOMIC ADVISORY
South-East Asian countries, apart from Vietnam and Thailand, haven’t experienced improvements in their (merchandise) trade balances Merchandise trade balances (US$ terms), 2001-2018 Indonesia 50
US$bn (12-mth moving total)
Vietnam 15 10
40
5
30
0
20
-5
10
-10
0
-15
-10
-20
-20
-25 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Philippines 10 5 0 -5 -10 -15 -20 -25 -30 -35 -40
US$bn (12-mth moving total)
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
10
US$bn (12-mth moving total)
Thailand 30
US$bn (12-mth moving total)
Malaysia 50 45 40 35 30 25 20 15 10 5 0
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Singapore 60
20
50
10
40
0
30
-10
20
-20
10
-30
0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
US$bn (12-mth moving total)
US$bn (12-mth moving total)
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Sources: National statistical agencies and/or central banks.
CORINNA ECONOMIC ADVISORY
South-East Asian countries’ exports to China have been increasing but remain less important than ‘advanced’ economies (or each other) Merchandise export destinations, 1990-2017 Vietnam
Indonesia 100
100
100
80
80
80
60
60
60
40
40
40
20
20
20
0
0 1990 China
1995 Japan
2000 NE Asia
2005
2010
SE Asia
US
2015
2017
EU
Other
na
1990 China
1995 Japan
2000 NE Asia
2005
2010
SE Asia
US
2015
2017
EU
Other
Thailand
Philippines
0 1990
China
100
100
80
80
80
60
60
60
40
40
40
20
20
20
0
0 China
1995 Japan
2000 NE Asia
2005
2010
SE Asia
US
2015 EU
2017 Other
1990 China
1995
Japan
2000
NE Asia
2005
2010
SE Asia
US
2015
EU
2017
Other
Singapore
100
1990
11
Malaysia
1995 Japan
2000 NE Asia
2005
2010
SE Asia
US
2015 EU
2017 Other
0 1990 China
1995 Japan
2000 NE Asia
2005
2010
SE Asia
US
2015
2017
EU
Other
Note: Singapore did not publish data on its trade with Indonesia prior to 2000. Sources: IMF, Direction of Trade Statistics.
CORINNA ECONOMIC ADVISORY
Indonesia & Malaysia still heavily dependent on energy exports, other countries more competitive in high- or medium-technology exports Revealed competitive advantage, 2000-2016
12
Indonesia
Vietnam
Malaysia
Philippines
Thailand
China
Note: ‘Revealed competitive advantage’ is the ratio of the share of a country’s group of products in a country’s exports to the share of the same group of products in total world exports. Source: IMF, Indonesia – Selected Issues, Country Report No 18/33, February 2018.
CORINNA ECONOMIC ADVISORY
Philippines and Vietnam are doing best on the long-term drivers of economic growth Drivers of GDP growth, 1975-2018 Philippines
Indonesia 8 7 6 5 4 3 2 1 0 -1 -2
1975-98 12
8 7 6 5 4 3 2 1 0 -1 -2
% pa
1999-08
2009-13
2004-18
1999-08
2009-13
2004-18
8 7 6 5 4 3 2 1 0 -1 -2
8 7 6 5 4 3 2 1 0 -1 -2
% pa
1975-98 12
% pa
Thailand
1999-08
2009-13
12
% pa
10
10
10
8
8
8
8
6
6
6
6
4
4
4
4
2
2
2
2
0
0
0
0
-2
-2
-2
-2
-4
-4
-4
-4
-6
-6
-6 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Employment-population ratio
05 06 07 08 09 10 11 12 13 14 15 16 17 18 Average hours worked
Sources: The Conference Board, Total Economy Database, May 2018.
05 06 07 08 09 10 11 12 13 14 15 16 17 18
Labour productivity
Population
% pa
1975-98
2004-18
10
-6
13
% pa
1975-98 12
% pa
Vietnam
1999-08
2009-13
2004-18
% pa
05 06 07 08 09 10 11 12 13 14 15 16 17 18
● Per capita GDP CORINNA ECONOMIC ADVISORY
Lower-income countries have considerable ‘catch-up’ potential if they can raise employment participation and productivity Drivers of GDP growth, 1975-2018 Myanmar 12
12
% pa
12
% pa
Singapore 12
% pa
10
10
10
10
8
8
8
8
6
6
6
6
4
4
4
4
2
2
2
2
0
0
0
0
-2
-2
-2
-2
1975-98 14
1999-08
2009-13
2004-18
1975-98 12
% pa
1999-08
2009-13
1975-98
2004-18 12
% pa
12
10
10
10
8
8
6
6
4
4
2
2
0
0
2
-2
-2
0
-4
-4
-2
-6
-6
8 6 4
05 06 07 08 09 10 11 12 13 14 15 16 17 18 Employment-population ratio 14
Cambodia
Malaysia
05 06 07 08 09 10 11 12 13 14 15 16 17 18 Average hours worked
Sources: The Conference Board, Total Economy Database, May 2018.
1999-08
2009-13
05 06 07 08 09 10 11 12 13 14 15 16 17 18
Labour productivity
1975-98
2004-18
% pa
Population
% pa
16 14 12 10 8 6 4 2 0 -2 -4 -6 -8
1999-08
2009-13
2004-18
% pa
05 06 07 08 09 10 11 12 13 14 15 16 17 18
● Per capita GDP CORINNA ECONOMIC ADVISORY
Singapore and Thailand are especially challenged by demography − but most other countries have scope to boost employment participation Proportion of population aged 65 and over, 2017 and 2025 (f) 20 18 16
Employment as a proportion of population aged 15-64, 2017 100
% of total population
% of population aged 15-64, 2017
Change between 2017 & 2025
90
2017
14
80
12 70
10 8
60 6 4
50
2 40
0 Cam- Philip- Indo- Myan- Mal- Viet- Thai- Singbodia pines nesia mar aysia nam land apore
15
South India Brazil China Russia Africa
Philip- Mal- Indo- Thai- Viet- Myan- Sing- Campines aysia nesia land nam mar apore bodia
Russia India South Brazil China Africa
Sources: United Nations Department of Economic and Social Affairs Population Division, World Population Prospects 2017; The Conference Board, Total Economy Database, May 2018.
CORINNA ECONOMIC ADVISORY
One way for many South East Asian countries to lift their employment participation rates would be to remove barriers to women’s employment Female labour force participation rate as a pc of male rate, 2017 120
%
100
SP BN
80
60
40
20
0 IN
TL
ID
MM
PH
BR
ZA
TH RS
CN
VN
KH
LA
Source: The World Bank and International Labour Organization. 16
CORINNA ECONOMIC ADVISORY
Most South East Asian workers work relatively long hours − but there is considerable scope for lifting productivity (except in Singapore) Average weekly hours worked, 2017 50
Labour productivity as a pc of US level, 2017 100
Hours per week
GDP per hour worked as a pc of US level
90
48
80
46
70
44
60
42
50
40
40
38
30
36
20
34
10
32
0
30 Indo- Philip- Viet- Thai- Sing- Mal- Myan- Camnesia pines nam land apore aysia mar bodia
Brazil Russia India China South Africa
Cam- Myan- Viet- Philip- Indo- Thai- Mal- Singbodia mar nam pines nesia land aysia apore
India China Brazil South Russia Africa
Source: The Conference Board, Total Economy Database, May 2018. 17
CORINNA ECONOMIC ADVISORY
Most South East Asian countries are in the second quartile of international competitiveness rankings, except for Singapore, and Cambodia & Laos World Economic Forum Global Competitiveness Rankings 2017 South East Asia
Other Asian economies
Indo- Philip- Viet- Thai- Mal- CamSinga nesia pines nam land aysia bodia Laos -pore Brunei 'Competitiveness Pillars' Institutions Infrastructure Macro environment Health & primary education Higher education & training Goods market efficiency Labour market efficiency Financial market development Technological readiness Market size Business sophistication Innovation Global Competitiveness Index
18
Japan Korea
BRICs
Tai- Hong AusNew South wan Kong tralia Zealand China India Brazil Russia Africa
47 52 26 94 64 43 96
94 97 22 82 55 103 84
79 79 77 67 84 91 57
78 43 9 90 57 33 65
27 22 34 30 45 20 26
106 106 70 101 124 85 48
62 102 114 103 105 76 36
2 2 18 3 1 1 2
40 60 45 31 67 67 47
17 4 93 7 23 13 22
58 8 2 28 25 24 73
30 15 5 15 17 12 25
9 1 6 26 14 2 4
18 28 27 12 9 28 28
3 23 16 6 7 9 5
41 46 17 40 47 46 38
39 66 80 91 75 56 75
109 73 124 96 79 122 114
83 35 53 54 32 80 60
76 61 82 121 85 54 93
37 80 9 32 31
52 83 27 58 65
71 79 31 100 71
40 61 18 42 50
16 46 24 20 22
61 97 84 106 110
75 110 101 89 81
3 14 35 18 9
87 60 110 92 80
20 15 4 3 8
74 29 13 26 18
19 25 20 21 11
5 9 33 11 26
6 27 22 28 27
1 13 64 24 20
48 73 1 33 28
42 107 3 39 29
92 55 10 56 85
107 57 6 71 49
44 54 30 37 39
36
56
55
32
23
94
98
3
46
9
26
15
6
21
13
27
40
80
38
61
Note: the rankings cover 138 countries and are based on a combination of ‘hard’ data and subjective responses to a survey of over 14,000 ‘business leaders’. Source: World Economic Forum, The Global Competitiveness Report 2017-18.
CORINNA ECONOMIC ADVISORY
Corruption is still a problem in most South East Asian countries, though some are showing improvement − as they are on ‘economic freedom’ Corruption perceptions index scores, 2012-2017
‘Economic freedom’ index scores, 2013-2018
20
20 MM
10 LA
5
VN
ID
RS
0
PH TH
KH
BN
IN CN ZA MY
SP
-5 BR
-10
10
5
IN
40 50 60 Index score, 2017
70
80
90
100
TH SP
KH
-5 BR
-15 30
MY
PH
ZA
0
-20 20
LA CN VN
-10
10
ID
RS
-15
0
MM
15 Change in index score 2013 to 2018
Change in index score, 2012 to 2017
15
0
10
20
30
40 50 60 Index score, 2018
70
80
90
100
Sources: Transparency International, Corruption Perceptions Index 2017; The Heritage Foundation, 2018 Index of Economic Freedom. 19
CORINNA ECONOMIC ADVISORY
Some South-East Asian economies have been successfully diversifying into more complex sectors – but Indonesia in particular is lagging Index of economic complexity, 1995-2016 South-East Asia 2.0
BRICS 2.0
Index Singapore
1.5
Index
1.5 China
Malaysia
Thailand
1.0
1.0
Brazil
Philippines
Russia
0.5
0.5
India
Vietnam 0.0
0.0
South Africa
Indonesia -0.5
-1.0
Cambodia
-1.0 Laos
-1.5
-1.5
-2.0
-2.0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
20
-0.5
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Note: The Economic Complexity Index is a measure of the diversity and sophistication of a country’s exports, devised by Cesar Hidalgo and Ricardo Hausman, The Building Blocks of Economic Complexity (2009). Source: Harvard University, Centre for International Development, Atlas of Economic Complexity.
CORINNA ECONOMIC ADVISORY
‘Core’ inflation remains low except in the Philippines; ‘headline’ inflation susceptible to rising energy prices Headline and ‘core’ inflation, 2001-2018 Vietnam
Indonesia 20 18 16 14 12 10 8 6 4 2 0
30
% change from year earlier
'Headline'
'Core'
8
20
6
15
4
10
2
5
0
0
-2
-5 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Thailand
Philippines 10 8 6
10
% change from year earlier
'Headline'
% change from year earlier
6 ‘Core’
4
'Core'
2 0
2
-2
0
-4
-2 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
% change from year earlier
'Headline'
'Core'
-4 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Singapore
8
4
21
10
% change from year earlier
25
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
12
Malaysia
'Headline'
-6 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
9 8 7 6 5 4 3 2 1 0 -1 -2
% change from year earlier
‘Core'
'Headline' 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Note: ‘core’ inflation generally excludes food prices, but in the Philippines and Thailand also excludes energy prices, while in Malaysia also excludes non-alcoholic beverages and in Indonesia excludes ‘government administered prices’. The Singapore ‘core inflation’ measure (compiled by MAS) excludes private road transport and accommodation, but includes food and energy. Sources: National statistical agencies and/or central banks.
CORINNA ECONOMIC ADVISORY
Partly thanks to ‘macro-prudential’ measures, property price inflation has been better contained in South East Asia than in Hong Kong Residential property prices South East Asia 300
North East Asia 300
2008 = 100
Australia & New Zealand 300
2008 = 100
2008 = 100
Hong Kong 250
250
250
200
200
Malaysia 200
Indonesia
NZ 150
150
150
Korea
Thailand 100
Philippines
Singapore
100
Japan
Australia 100
50
50
50
0
0
0
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Sources: Bank for International Settlements; CoreLogic (Australia); Property iQ / RBNZ (New Zealand). 22
CORINNA ECONOMIC ADVISORY
Indonesia aside, South East Asian debt levels (and debt servicing obligations) are relatively high by emerging economy standards Credit to non-financial sectors, September 2017 400
Private non-financial sector debt service ratios, September 2017 30
% of GDP Sep 2017
350
% of GDI plus gross interest Sep 2017
25
300 20 250
15
200
150 10 100 5 50
0
0 Indonesia
Thailand
Mal- Sing- Korea Hong China India aysia apore Kong
Brazil
Russia South Africa
Indonesia
Thailand
Mal- Sing- Korea Hong China aysia apore Kong
India
Brazil
Russia South Africa
Source: Bank for International Settlements. 23
CORINNA ECONOMIC ADVISORY
South East Asia private sector debt is high relative to other EMs (Indonesia aside) − and banks provide nearly all of it Credit to non-financial sectors, by sector September 2017 400
Banks’ share of total credit to private nonfinancial sectors, September 2017 100
% of GDP Sep 2017
General government
350
Households Non-financial corporations
300
95
90
250
85
200
80
150
75
100
70
50
65
0
60 Indonesia
Thailand
Malaysia
Sing- Korea apore
Hong Kong
China
India
Brazil
Russia South Africa
% of total credit to private non-financial sector
Indonesia
Thailand
Malaysia
Sing- Korea apore
Hong China Kong
India
Brazil
Russia South Africa
Source: Bank for International Settlements. 24
CORINNA ECONOMIC ADVISORY
Most South East Asian government are running budget deficits but debt positions are either stable or improving and fiscal policy is neutral General government cyclically-adjusted balance and gross debt, 2008-2023 Vietnam
Indonesia 1
% of GDP
% of GDP
60
0
55
-1
50
1 0 -1 -2 -3 -4 -5 -6 -7 -8
45
-2
40
-3
35
-4
30
-5
Forecast
-6
25 20
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
1
0
55
-1
50
% of GDP
45
-2
40
-3
35
-4
30
60
1
55
0
55
50
-1
50
45
-2
40 35 30
% of GDP
% of GDP
45 40
-3
35
-4
25
-5
20
-6
60
30 25 20 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Singapore 60
14
0
55
12
110
-1
50
10
105
8
100
6
95
30
4
90
25
2
85
20
0
80
% of GDP
% of GDP
45
-2
40
-3
35
-4
-5
25
-5
-6
20
-6
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Cyclically adjusted primary balance (left scale) 25
% of GDP
Thailand 60
% of GDP
% of GDP
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Philippines 1
Malaysia
% of GDP
% of GDP
115
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Gross debt (right scale)
Note: Vietnam general government balance is not cyclically adjusted. Source: IMF, Fiscal Monitor (April 2018).
CORINNA ECONOMIC ADVISORY
Indonesia and Philippines’ external finances make them more vulnerable to global financial shocks – some risks also for Malaysia Current account balances 15
% of GDP Thailand
10 5
Philippines
0 -5
Indonesia
-10
External debt indicators 100 90 80 70 60 50 40 30 20 10 0
Indo- Philip- Vietnesia pines nam
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 40
% of GDP
8
30
Singapore
20 10
7
Thai- Myan- Mal- Cam- Laos land mar aysia bodia
External debt servicing as % of exports, 2016
6 5
Malaysia
0
-10
External debt as % of GNI, 2016
4 Vietnam
-20
3 2 1
-30
0
-40 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Indo- Philip- Vietnesia pines nam
Thai- Myan- Mal- Cam- Laos land mar aysia bodia
50 45 40 35 30 25 20 15 10 5 0
Short-term debt as % of total, 2016
Indo- Philip- Vietnesia pines nam 100 90 80 70 60 50 40 30 20 10 0
Thai- Myan- Mal- Cam- Laos land mar aysia bodia
Short-term external debt as % of FX reserves, 2016
Indo- Philip- Vietnesia pines nam
Thai- Myan- Mal- Cam- Laos land mar aysia bodia
Note: Debt data for Myanmar are for 2015. Sources: Thomson Reuters Datastream; The World Bank. 26
CORINNA ECONOMIC ADVISORY
Indonesian rupiah and Philippine peso are the most vulnerable South East Asian currencies Bilateral exchange rates vs US dollar and real effective exchange rates Thailand
Indonesia 7 8
'000 Rupiah per US$
2010 = 100
110 100
9 10
REER
(right scale)
11 12 Rupiah vs US$
14
33
80
50
Pesos per US$
2010 = 100
56
110
(left scale, inverted)
100 REER
(right scale)
60
90 80 70
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
27
130 120
Pesos vs US$
48
52
(left scale, inverted)
1.10
110
1.20
105
1.30
100 95
REER
(right scale)
43
115
90
48
1.40
Ringgit per US$
Ringgit vs US$ (left scale, inverted)
2010 = 100
S$ vs US$
110
(left scale, inverted)
105 100 REER
1.70 1.80
80
1.90
120 115
1.60
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
2.50 2.75 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75
S$ per US$
1.50
85
(right scale)
95 90 85 80
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Malaysia
Philippines
44
Baht vs US$
38
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
40
2010 = 100
60
(left scale, inverted)
15
36
Baht per US$
90
70
13
28
Singapore
Vietnam 2010 = 100
REER
(right scale)
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
110
12
105
14
100
16
95
18
90
20
85
22
80
24
'000 Dong per US$
Dong vs US$
(left scale, inverted)
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Sources: Thomson Reuters Datastream; Bank for International Settlements.
CORINNA ECONOMIC ADVISORY
Low inflation has allowed most Asian central banks to keep interest rates low and stable, but BI & BSP have had to hike to defend their currencies Monetary policy indicator rates and 10-year bond yields Indonesia
Thailand
20 18 16 14 12 10 8 6 4 2 0
7
% pa
10-year bond
BI rate
3
2 BoT policy rate
1
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Malaysia 6
% pa
5
12 10 10-year bond
6 BSP reverse repo rate 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
1
Overnight call rate
0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Vietnam
% pa
18
10-year bond
14 12
3
10
BNM policy rate
% pa
16
4
2
4
28
10-year bond
3
4
0
14
0
10-year bond
2
16
2
% pa
4
5
Philippines
8
5
% pa
6
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 18
Singapore
SBV discount rate
8 6
1
4
0
0
2
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
3-mth rate 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Sources: Thomson Reuters Datastream; national central banks.
CORINNA ECONOMIC ADVISORY
Snapshot of political developments in South East Asia Indonesia − − −
The next Presidential election will be in April 2019, and is likely to be a re-run of the 2014 contest between incumbent Joko Widodo (‘Jokowi’) and ex-general (and Suharto son-in-law) Prabowo Subianto Parliamentary elections will be held on the same day (for the first time) regional elections held in late June this year gave few pointers to the outcome of next year’s election
Philippines − − −
President Rodrigo Duterte (Asia’s Donald Trump) is in office until May 2022 Half the Senate and all of the House of Representatives are up for election in May 2019 Duterte wants to alter the constitution to establish a federal system with 18 states (as opposed to the current Manila-centric form of governance) and to create a French-style Presidential-Parliamentary system of national government (possibly removing the single-term limit on Presidents, or creating an alternative post of PM for Duterte post-2022)
Thailand − −
The ruling military junta headed by Prayut Chan-ocha has foreshadowed elections in February 2019 (this is the sixth promised election date since the military coup in May 2014) The current National Legislative Assembly comprises 250 members, of whom at least 130 are military or police officers
Malaysia − − − − 29
Elections held on 9 May 2018 saw the ouster of the Barisan Nasional coalition which had ruled since 1957, by a coalition led by 92-year-old former PM Mahathir Mohamad former PM Najib Razak has been arrested on corruption charges related to $billions missing from the 1MDB fund The new government will scrap the GST (VAT) introduced by the previous government and re-consider proposed Chinesefunded infrastructure investments Mahathir will supposedly hand over to his former deputy Anwar Ibrahim (whom he had jailed on trumped-up sodomy charges 20 years ago) CORINNA ECONOMIC ADVISORY
China’s influence in South East Asia is increasing while that of the United States is waning – making South East Asian nations apprehensive China has effectively won the struggle for control of the South China Sea −
Since 2013 China has built a string of artificial islands in among shoals and reefs within the ‘nine dash line’ over which it assets sovereignty, installing airbases, radar systems and naval facilities
−
this year China has landed bombers on the Paracel Islands, and installed anti-ship and surface-to-air missiles on the Spratly Islands
−
According to Adm. Phillip Davidson, Head of the US IndoPacific Command, “China is now capable of controlling the South China Sea in all scenarios short of war with the US”
South East Asia is a key focus for ‘Belt & Road’ projects −
Major proposed projects include a road from Kunming (Yunnan) to Bangkok, a China-Laos railway, Thailand’s ‘Eastern Corridor’ project and (possibly) Kra Canal project, Indonesia’s Jakarta-Bandung railway, and a proposed Kuala Lumpur-Singapore railway
−
The new Malaysian Government is reconsidering that country’s participation in BRI projects Some other countries are becoming more wary about the terms and conditions of Chinese infrastructure loans
− 30
“China is a big country, and other countries are small countries, and that’s just a fact” ─
Yang Jiechi (Chinese Foreign Minister), July 2010
CORINNA ECONOMIC ADVISORY
Summary and conclusions Economic growth will likely slow somewhat in Indonesia and the Philippines, pick up in Thailand, and remain close to recent rates in Malaysia, Singapore and Vietnam Inflation will likely pick up in Thailand and the Philippines, decline in Malaysia (due to abolition of the GST), and remain low in other economies (in Indonesia partly due to regulatory caps on energy prices) South-East Asian economies are less vulnerable to a ‘trade war’ than their North-East Asian counterparts given smaller direct trade exposures – but would still be adversely affected South-East Asian economies also vulnerable, to varying degrees, to higher US interest rates and a stronger US dollar – with Indonesia and Philippines most exposed given weaker current account positions and higher levels of shortterm external debt Compared with North-East Asia, South-East Asian economies have more favourable demographic profiles (with the exceptions of Singapore and Thailand), and considerable potential for lifting employment participation and labour productivity However, Singapore aside, South-East Asia’s longer-term growth prospects are constrained by infrastructure deficiencies, domestic product and labour market inefficiencies, shortcomings in governance, and (in some cases) poorly performing education systems Philippines, Indonesia and Thailand all confront internal security challenges from regional separatists and/or returning jihadists, and in Indonesia’s case the spread of Wahabiism sponsored by Saudi Arabia Considerable potential for political surprises in Malaysia, Indonesia, Thailand and Philippines South-East Asian nations are losing faith in the value of their alliances with the US (especially under Trump) – some are explicitly moving closer to China, but others are becoming more wary 31
CORINNA ECONOMIC ADVISORY
