Asian economists still have bright outlooks for their economies in 2018 and beyond, but concerns are rapidly increasing over the negative impact of U.S. President Donald Trump's protectionist policies, a survey found. The rise of protectionism is now seen as the biggest risk for the region's economies for the first time in a year, according to a risk scoring system of the Japan Center for Economic Research.
JCER and Nikkei conducted a quarterly consensus survey from March 9 to March 28, collecting 44 answers from economists and analysts in the five biggest members of the Association of Southeast Asian Nations -- Indonesia, Malaysia, the Philippines, Singapore and Thailand -- in addition to India.
The growth forecasts for the major ASEAN countries and India remain strong. The weighted average of growth forecast for ASEAN5 in 2018 was revised upward from the previous survey by 0.1 point to 5.0%. An increase in investment and private consumption, as well as moderating, but firm, exports, are expected to support growth.
The Indonesian economy is expected to grow at 5.4%, up 0.3 point from the 2017 result. "Consumption and government spending are the main drivers of growth," explained Dendi Ramdani of Bank Mandiri. A series of events related to local elections in June, and to preparations for the 2019 presidential election, should also boost the economy.
The 2018 forecast for the Philippines is 6.9%, up by 0.1 point from the previous survey. The economy has grown at 6% or more since 2012. With strong investment and consumption, the Philippine economy "is running smoothly on momentum," said Alvin Ang of Ateneo de Manila University.
The economies of three export-oriented countries -- Malaysia, Singapore and Thailand -- grew rapidly in 2017, as exports of electronics and other products accelerated. The expansion of exports may slow in 2018, but is likely to remain firm. Infrastructure and other investment, as well as private consumption, are seen as robust. Nattaporn Triratanasirikul of Kasikorn Research Center expects steady growth of the Thai economy "with the main drivers from external demand and public investment." Wan Suhaimie of Kenanga Investment Bank said of the Malaysian economy: "Growth momentum backed by domestic demand would continue to propel the economy well into 2018."
The Indian economy slowed in fiscal 2017/18, which ended March 2018. This was because of the confusion surrounding the introduction of the new goods and services tax in July 2017. The 2017/18 growth rate was estimated to be 6.7%, down by 0.4 point from the previous fiscal year. The GST and demonetization in November 2016 are major measures of the economic reforms under the administration of Prime Minister Narendra Modi.
The 2018/19 growth forecast predicted a recovery by 0.7% from the previous fiscal year to 7.4%. "The waning impact of demonetization and ironing out of GST related glitches will support domestic activity," predicted Dharmakirti Joshi of CRISIL in India. Sonal Varma of Nomura said: "We see the continuation of a V-shaped recovery."
While painting bright pictures, economists also identified emergent concerns. U.S. President Trump on March 22 announced a plan to impose tariffs on goods and services from China as a measure to penalize the country's alleged violation of intellectual property rules. China responded with announcements of plans of retaliatory tariffs. Anxiety over a U.S.-China trade war is mounting. The U.S. also imposed tariffs on steel and aluminum products from various countries.
Asked to identify major risks for their economies in the coming 12 months, economists pointed to the rise of protectionism as the greatest risk in Singapore, Thailand, Malaysia and India, the second greatest risk in the Philippines, and the third greatest risk in Indonesia.
In the combined score of the six countries according to the JCER Risk Signal -- which reaches 60 or more when all economists regard an item as a top-three risk -- protectionism topped the rankings for the first time since March 2017. Protectionism was the largest risk in the December 2016 and March 2017 surveys, and retreated to fourth place in the September 2017 and December 2017 surveys.
The Trump tariffs "risk increasing protectionism," and threaten "the openness of global markets in a rule-based trading system that the Indian economy needs," warned Shekhar Shar of the National Council of Applied Economic Research in India. "Rising trade tensions leading to a full-blown trade war would dampen global trade and world economy and affect the prospects of exports," worries Lee Heng Guie of Socio-Economic Research Centre in Malaysia.
Financial turmoil triggered by the policies of U.S. President Trump was also a serious consideration. It was the second-largest risk in the combined score of six countries, the second biggest risk in Indonesia, and the third biggest risk in Singapore.
Inflation ranked as the number-one risk in the Philippines. Prices may increase "on the back of volatile global oil prices and a weaker peso," said Pauline Revillas of Metropolitan Bank. The tax reforms in January, which reduced income-tax rates and increased some excise taxes, are also expected to raise the inflation rate in 2018. Capital outflows were regarded as the biggest risk in Indonesia.
For more details of the survey, including a full list of respondents, go to the JCER's website: