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Last updated: Thursday, December 13, 2018


Southeast Asia Growth Estimated at 4.7 Pct in 2018

Posted: Wednesday, January 03, 2018

The latest Economic Insight: Southeast Asia recently released by the Institute of Chartered Accountants in England and Wales (ICAEW) shows that Southeast Asia is set to end 2017 on a high note, propelled by a broad-based pickup in global growth and world trade and by firmer commodity prices.

According to ICAEW, 2017 has been a great year for Southeast Asia. The region is on track to clock a 5 per cent growth for the first time in four years.
Several factors have contributed to this strong performance. Since the beginning of 2017, the region has benefited from the improving outlook for world growth.
Fewer concerns about rising trade protectionism, continued resilience in domestic demand and partly accommodative macro policies have boosted the outlook.
World trade continues to grow comfortably over its average pace in recent years in 2018 as well. However, the strength witnessed in 2017 is unlikely to sustain as China’s economy continues to cool down on the back of tightening monetary conditions. World trade growth is forecast to slow to 4.2 per cent from 6 per cent in 2017.

According to the report, in Southeast Asian nations, monetary policy is expected to turn less accommodative. Low inflation has not only pushed up real wages and given consumers added purchasing power in recent years, but has also given many Asian central banks the leeway to pursue monetary policy independently of the United States Federal Reserve (FED). But, this is unlikely to remain the case going forward.

Inflationary pressures in some Southeast Asian countries, particularly Malaysia and the Philippines, have risen, in line with the benign global reflation that is taking place as a result of improving growth and world trade and higher commodity prices. In other countries, high leverage and financial stability risks have raised the need for policy normalisation, as growth has picked up.

According to ICAEW economic advisors and Oxford Economics economists, normalisation of monetary policy, both by domestic central banks and the FED, will proceed in a gradual and well communicated manner. Macro policy normalisation cycle, along with still relatively solid trends in global trade growth, is expected to ensure that growth remains reasonably resilient across the region.

Besides, most Southeast Asian central banks are expected to tighten at the mild pace of 25 points each year.

Mr Mark Billington, Southeast Asia Regional Director of ICAEW, said, “With all factors and growth prospects taken into account, we estimate a mild GDP growth slowdown in 2018 to 4.7 per cent from 5 per cent in 2017, as trade growth cools in tandem with gradual slowdown in China and domestic monetary policies begin to tighten.”

Thu Ha

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