Analysts guardedly optimistic about 2017 Asian growth
Revised forecasts show improvements, but concerns over Trump remain
KIYOSHI KUSAKA, Principal economist, Japan Center for Economic Research
Economists of major Southeast Asian countries revised up their growth forecasts for 2017 from three month ago due to brighter prospects for exports and in anticipation of U.S. President Donald Trump's pro-growth policies in the short term. Currently, the negative effects of his protectionist policies have yet to impact real economies. In the longer term, however, concerns have increased over protectionism and various uncertainties as well as on the effectiveness of his administration.
The Japan Center for Economic Research and Nikkei conducted a quarterly consensus survey from March 10-30, collecting 59 answers from economists and analysts in India and the five biggest members of the Association of Southeast Asian Nations -- Indonesia, Malaysia, the Philippines, Singapore and Thailand.
2017 prospects rise
The 2017 forecasts were revised down in the December survey for the weight-averaged ASEAN 5 as well as for Indonesia, Malaysia, Singapore and Thailand, reflecting increased anxieties over Trump's protectionist rhetoric. The forecasts rose this time. The ASEAN 5 figure was up 0.1 point to 4.5% as the forecasts for Singapore, Malaysia and Thailand -- three export-driven economies -- improved.
Singapore's forecast in 2017 was revised up 0.5 points to 2.2%. "Pick up in external demand will likely provide a strong upswing in Singapore's exports," advised Manu Bhaskaran, CEO of Centennial Asia Advisors in Singapore. Malaysia's forecast was revised up 0.1 point to 4.3% as "exports have started to recover from November 2016 and will likely provide a boost to the country's economic growth in 2017," according to RHB Research's chief economist Lim Chee Sing. The figure for Thailand was revised up 0.2 points to 3.4%.
The 2017 forecasts for Indonesia and the Philippines remain unchanged. The two economies are likely to experience steady growth. Economists predict growth rates of 5.2-5.6% and 6.6-6.7%, respectively, through 2019. "Domestic fundamental and macroeconomic stability are relatively sound," said economist Wisnu Wardana of Bank Danamon Indonesia. In addition, economists see higher commodity prices helping increase Indonesia's exports. For the Philippines, Standard Chartered Bank's Edward Lee, head of ASEAN research, expects strong growth "supported by robust domestic demand, increasing infrastructure investment and steady services-sector growth."
India's prospects were somewhat distorted by demonetization, which was unexpectedly introduced last November, eliminating the 500 and 1000 rupee bank notes in order to address money laundering, tax evasion and other crimes. The policy dampened consumption in some regions and sectors. The estimate for 2016-2017 through March 2017 was revised up 0.2% from the December survey, while the forecast for 2017-2018 was down. In the longer term, economists see strong growth through 2019-2020. Mizuho Bank's Dr. Tirthankar Patnaik, chief strategist and head of Indian research, explained: "The Indian economy remains in a gradual, consumption-driven recovery."
President Trump's pro-growth policies are generally viewed positively in the short term. "Trump's proposed reflationary policies, including fiscal spending and tax cuts, if successful, would support stronger U.S. economic growth and benefit export-dependent emerging markets, including Malaysia," said Wan Suhaimie Saidie, head of economics department at Kenanga Investment Bank in Malaysia.
Concerns about Trump
While improving their forecasts, economists expressed concerns over Mr. Trump's policies. The main worries are his protectionist stance and increased uncertainty, which may rile financial markets.
Asked the main risks for their economies, "Rise of Protectionism" was the biggest risk for Malaysia, Singapore and Thailand and the third biggest risk for the Philippines and India. "Financial turmoil triggered by the policies of U.S. President Donald Trump" was the biggest risk for Indonesia and the second biggest risk for Thailand. The survey uncovered seven "Trump-related risks" among the three biggest risks cited by the six countries; an increase from five in the December survey.
"Protectionism could potentially disrupt the recovery of the global economy," warned Dr. Phacharaphot Nuntramas, vice president of the Siam Commercial Bank Economic Intelligence Center in Thailand. CRISIL chief economist Dharmakirti Joshi revealed his worries about the Indian economy: "Rise in protectionism will hurt the prospects for India's manufacturing sector and IT-ITES sector, its key export industry."
Concerns over Mr. Trump's immigration policies were also shared by economists. Professor Alvin Ang of Ateneo de Manila University worries such policies "could force many migrants [to] return home" to the Philippines in the future.
Chairman Umar Juoro of Indonesia's Center for Information and Development Studies said: "The main issue on Trump's policies is uncertainty." Furthermore, questions were raised regarding his administration's ability to govern. "The ability of President Trump to push through his policies remains doubtful," claimed Lee of Standard Chartered. Associate professor Randolph Tan of Singapore University of Social Sciences warns that "severe turmoil could result from mismanaging the changes."
Monetary policy troubling
In addition to Trump-related risks, economists see "repercussions of U.S. monetary policy" as a big risk. It was the biggest risk for India and second and third biggest risk for Indonesia and Thailand, respectively. "Rise in commodity prices" was seen as a big risk in India while "fall in commodity prices" was considered a big risk in Malaysia.
Details of the survey can be found on the JCER's website:
List of survey respondents:
Indonesia: Juniman, chief economist, Maybank Indonesia; Dendi Ramdani, department head of industry and regional research, Bank Mandiri; Umar Juoro, chairman, Center for Information and Development Studies; Wisnu Wardana, economist, Bank Danamon Indonesia, Malaysia: Suhaimi Ilias, group chief economist, Maybank; Lim Chee Sing, chief economist, RHB Research Institute; Wan Suhaimie Saidie, head of economics department, Kenanga IB, Philippines: Alvin Ang, professor, Ateneo de Manila University; Jonathan L. Ravelas, FVP chief market strategist, BDO Unibank; Pauline Revillas, Research Analyst, Metropolitan Bank & Trust; Jojo Gonzales, head of research, Philippine Equity Partners; Jose Cuyegkeng, senior economist, ING Bank; Angelo Taningco, economist, Security Bank; Victor Abola, senior economist, University of Asia and the Pacific, Singapore: Manu Bhaskaran, CEO, Centennial Asia Advisors; Randolph Tan, associate professor, Singapore University of Social Sciences; Yuma Tsuchiya, senior economist, Bank of Tokyo-Mitsubishi UFJ, Thailand: Phacharaphot Nuntramas, senior vice president, Siam Commercial Bank Economic Intelligence Center; Nattaporn Triratanasirikul, Head-Research, Kasikorn Research Center; Thammarat Kittisiripat, vice president, KT Zmico Securities; Somprawin Manprasert, chief economist, Bank of Ayudhya; Nalin Chutchotitham, Thailand economist, HSBC, India: Kentaro Konishi, president and CEO, Daiwa Capital Markets India; Rajiv Kumar, Founder Director, Pahle India Foundation; Dharmakirti Joshi, chief economist, Crisil; Sonal Varma, chief India economist, Nomura India, Tirthankar Patnaik, chief strategist & head of research, India, Mizuho Bank, "For multiple countries: Euben Paracuelles, senior economist, Nomura Singapore; David Fernandez, Managing Director, Barclays Bank, Singapore; Edward Lee, Head of Regional Research, ASEAN, Standard Chartered Bank; Arup Raha, group chief economist, CIMB Group