QNB: Southeast Asia is set to regain its place as a growth leader in 2023
In its weekly commentary, QNB said: “Before the pandemic, Southeast Asia was one of the most dynamic economic regions in the world, driving opportunity and growth on a significant scale for decades. was particularly the case with the six largest economies of the Association of Southeast Asian Nations (ASEAN-6), which includes Indonesia, Thailand, Singapore, Malaysia, Vietnam and the Philippines. In fact, ASEAN-6 economies have outperformed most other countries in terms of GDP growth through early 2020.
“However, this decades-long picture has changed markedly with the turnaround brought by the Covid-19 pandemic. Following the shock caused by the global spread of Covid-19, the ASEAN-6 countries have become laggards rather than leaders in short-term economic performance. This was caused by a slower start to mass vaccination, less stimulus and a slowdown in China. Even last year’s partial reopening did not enough to put the region at more normal levels of relative performance, especially after a rather weak period in 2021. But we expect the Asean-6 countries to start shining again as one of the global growth hotspots in 2023.
“For the first time in two years, the growth differential of ASEAN-6 compared to advanced economies is expected to exceed their long-term historical norms. The growth differential is a key indicator for emerging markets to measure the “gap “, that is, the growth needed to reach the level of per capita income in advanced economies, also called “catch-up”. as in the aftermath of the pandemic, tend to delay the catch-up.
“Historically, before the pandemic, while advanced economies show a long-term growth average of 1.85%, ASEAN-6 economies show an average of 5%. This growth differential of 315 basis points, if it is maintained over time, suggests that the ASEAN-6 countries could quite quickly catch up with the per capita income level of the advanced economies.
The bank pointed out: “Advanced economies are expected to slow further this year, while Asean-6 economies are more resilient to the current macroeconomic scenario and should exhibit robust mid-single-digit growth. Three factors underpin our expectations. for above-average growth outperformance of ASEAN-6 countries.
“First, the outlook for advanced economies is particularly challenging, due to a significant build-up of macroeconomic imbalances and the negative impact of idiosyncratic geopolitical shocks. This includes the effects of too much post-pandemic stimulus, strained labor and the Russian-Ukrainian war High inflation, lower real disposable incomes, rising interest rates, less political support and the European energy crisis are expected to weigh on growth in advanced economies, producing performance below average.
“Second, ASEAN-6 countries are not exposed to the same kinds of economic imbalances that most advanced economies are expected to experience in the coming quarters. Unlike countries struggling with tight labor markets, high inflation , energy supply constraints and policy space for more stimulus, ASEAN-6 countries are still operating mostly with some spare capacity from the pandemic shock, suggesting there is more room to grow or even stimulate their economies beyond potential GDP for some time without producing excessive persistent inflation. slowing growth in advanced economies. This protects their currencies against depreciation and thus prevents disruptive spikes in imported prices, per implementing less restrictive monetary policies and more favorable credit. conditions.
“Third, China’s economic reopening is expected to trickle down to the entire Asian region, boosting growth. China is rapidly moving away from Zero Covid policies, i.e. travel bans, lockdowns and ultra-tight social distancing measures that aim to suppress waves of new virus cases.In addition, Asia’s largest economy is also stepping up policy efforts to stimulate its economy.China’s growth has a high multiplier effect, often spreading globally and especially to ASEAN-6 countries, such as when it comes to export-oriented manufacturers of “Factory Asia”, such as Thailand, Malaysia and Vietnam , and commodity producers, such as Indonesia, Malaysia and the Philippines. Regional tourism is also expected to receive a significant boost with the return of Chinese travelers. materially positive for growth in the ASEAN-6 countries.
QNB concluded: “Overall, slower growth in advanced economies, stronger domestic macroeconomic fundamentals and the reopening of China should support a return to Asean-6 economic outperformance. positive and indicates that the catch-up path of advanced economies is on the right track, it should be noted and mentioned that the growth rate of the ASEAN-6 economies is still below the pre-pandemic growth average of 5 %”.
