South-East Asia’s GDP growth forecast to slow to 4.8% in 2019

18:41 | 27/03/2019 Society

Economic growth across South-East Asia region is expected to moderate to 4.8% this year, from 5.1% in 2018, as export growth cools amid increased trade protectionism and slower Chinese import demand, according to ICAEW’s latest Economic Insight: South-East Asia report. On the other hand, domestic demand and looser fiscal policies should cushion the region.

Economies started the year on a soft note, as a result of the weakness in global economic activity in late 2018. Regional merchandise exports growth tumbled in December 2018, contracting 2.3% on the year, following a weak outcome (2.2%) in November. The deterioration in export momentum was broad-based, with only Malaysia recording positive annual growth. While Singapore and China data showed some improvement in exports in January, the data is likely to be volatile in Q1 given the timing of Chinese New Year.

GDP growth across the region is set to moderate to 4.8% this year, further easing to 4.7% in 2020 as the export environment is expected to remain difficult. Exports are expected to remain under pressure, with the increase in trade protectionism over the past year unlikely to change any time soon. Vietnam’s GDP is forecasted to slow to 6.7% this year and 6.2% in 2020.

The full Economic Insight: South-East Asia report is available at:

"Looking ahead, we expect the risks to the economic outlook of the region to be primarily to the downside. A sharper slowdown in Chinese economic growth, triggered by worsening confidence or a renewed escalation in US-China trade tensions, both affect global trade and growth across the region,” said Sian Fenner, ICAEW Economic Advisor & Oxford Economics Lead Asia Economist. “That said, we do not expect the external environment to be as worrisome as it was in 2015/16, as China’s growth is also expected to stabilise in Q2.”

Domestic demand will likely provide some relief, together with accommodative macro policies. Most central banks are likely to keep policy rates unchanged well into the second half of 2019 amid muted inflationary pressures. Expansionary fiscal policy will also help, with fiscal spending expected to be strong in Indonesia, Thailand and the Philippines ahead of upcoming elections in H1 2019.

There are pockets of concern, however, with regards to investment growth in certain countries. In Singapore and Malaysia, private capex, especially in machinery and equipment (M&E) investment, has been on a downward trend where export growth has notably slowed. Residential investment will also be held back by demand and supply imbalances in both these economies. On a more positive note, construction, particularly infrastructure investment, is expected to limit the downside to overall investment. Benign inflation conditions and rising real income growth will also continue to support household spending.

Mark Billington, ICAEW Regional Director, South-East Asia, said, “Although we expect domestic demand to remain resilient, the impact of increased trade tensions in the past year and slower Chinese import demand is likely to act as a drag on the region’s growth as a whole. The outlook for Asia trade may continue to face a challenging export environment.”

Uyen Ly