Economist sees strong growth for ASEAN despite China turmoil

Despite China's economic turmoil, ASEAN is likely to experience its best growth this year since 2012, when it grew by 5.9 per cent, an economist said yesterday at an annual forum on the outlook of the region's economics and politics.

The reason is that the fallout from China's slowdown will be offset by the recovery of major economies like the United States, said Mr Manu Bhaskaran, founder of economic consultancy Centennial Asia.

Another factor is that domestic economic and political pressures are fading in major ASEAN countries such as Indonesia, Thailand and Malaysia, he added at the forum held by the Iseas-Yusof Ishak Institute.

"The global economy in terms of its demand for ASEAN exports is going to turn out somewhat better than expected," he said.

"We should not underestimate the slow but reinforcing recoveries in the G-3 economies, now further strengthened by lower oil prices," Mr Bhaskaran added, referring to the US, euro zone and Japan.

His positive outlook comes amid pessimistic headlines in the past week, as fears over the weakening Chinese economy led to a market rout that wiped out trillions of dollars in value. Pointing to the US, he noted the "gradual, slow" improvement in its labour market, as well as in housing, bank lending, and business and consumer confidence.

Similarly, the "fragile recoveries" in the euro zone and Japan are gradually gaining more strength, which, barring any political setbacks, is set to benefit ASEAN.

More than half of the world's emerging market economies are also expected to accelerate this year, Mr Bhaskaran said, fuelling greater demand for ASEAN exports.

Later, he told reporters: "If Singapore has some flexibility to switch our efforts from servicing China to the US or other markets... we can manage the Chinese slowdown."

Singapore's electronics sector will get a boost if G-3 capital spending recovers, he added. But he warned that Singapore faces such risks as real-estate deflation and a loss in business competitiveness.

He told the forum that he also expects Thailand, Malaysia and Indonesia to recover from recent political stresses. Malaysia's leadership, for example, appears to have "contained" the fallout over allegations on the finances of its state-backed investment fund, 1Malaysia Development Berhad. This should lead to less uncertainty this year.

Several policy reforms in recent years that had a negative impact initially might finally bear fruit, he added, citing Indonesia's removal of fuel subsidies in 2014.

Another expert, Mr Sam Cheong, held up the ASEAN Economic Community, formed on Dec 31 last year, as a "crucial cog in the wheel for unleashing ASEAN's potential".

"Any alternative to an integrated ASEAN will only weaken the attractiveness of the region, making it less competitive to its rising peers like China, India and other emerging economies," said Mr Cheong, head of United Overseas Bank's Foreign Direct Investment Advisory, at a separate panel. But some issues need to be ironed out, he said, citing red tape in business licence applications.

This article was first published on January 13, 2016.
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