Economists predict steady growth will continue in major Southeast Asian countries and India for 2017 and beyond, keeping their forecasts near the same levels as in the previous survey conducted three months ago. Concerns over protectionism and other risks linked to U.S. President Donald Trump persist, but appear to be less urgent than before. Economists are now focusing more on the strong growth potential in Asian economies. At the same time, they are beginning to look at new dangers, including terrorism and geopolitical risks.
The Japan Center for Economic Research and Nikkei conducted a quarterly consensus survey from June 9-30, collecting 58 answers from economists and analysts in the five biggest members of the Association of Southeast Asian Nations -- Indonesia, Malaysia, the Philippines, Singapore and Thailand -- and India.
The economic outlooks were severely deteriorated half a year ago in the December 2016 survey, conducted after the election of Trump as U.S. president, reflecting increased uncertainty and concerns over protectionism and other Trump-related risks. Prospects improved in the March survey as the first shock waves passed. The forecasts have remained at raised levels this time. Furthermore, the concerns over Trump-related risks appear to have abated.
The weighted average of growth forecasts for the ASEAN5 was revised upward by 0.1 point to 4.6% as figures for Malaysia, Singapore and Thailand were up. "Overall growth in the first quarter was lifted by strong exports" of electronics and other goods, said Lim Chee Sing of RHB Research Institute in Malaysia. The increase "has spilled over and lifted domestic demand as well," he added.
Indonesia's growth rate is expected to hit 5.2% in 2017, up from 5.0% the previous year. "The growth of private consumption, government expenditure and investment will be more solid," Bank Mandiri's Dendi Ramdani said.
The Philippines' forecast was revised downward for 2017 because of the delay in infrastructure investment in the early months of the year, but it remained at 6.4%, the highest figure in major ASEAN countries. "Robust domestic demand and steady services-sector growth should continue to provide support," said Edward Lee of Standard Chartered Bank.
The outlook for India is stronger. Economists expected that nation's economy will grow at over 7% through 2019/20 despite the short-term confusion following demonetization in November 2016 and the introduction of the Goods and Services Tax in July. "The Indian economy remains in a consumption-driven recovery," said Tirthankar Patnaik of Mizuho Bank.
Economists' views on the risks have changed significantly in the last three months. Risks linked to Trump, such as "rise of protectionism" were in the center of concern in the surveys after his election. "Rise of protectionism" was considered as the biggest risk in Singapore and Thailand and the third biggest risk in India and the Philippines in the March survey. "Financial turmoil triggered by the policies of President Trump," was the largest risk in Indonesia and the second largest in Thailand.
Economists' concerns over these risks remained in the June survey, but with less sense of urgency. "Rise of protectionism" stayed the biggest risk only in Singapore this time. It was the second and third biggest risks in India and Thailand, respectively. "Financial turmoil triggered by the policies of President Trump" was not seen as one of three biggest risks in any country.
"We no longer think a significant increase in trade protectionism is likely," said Nomura Singapore's Euben Paracuelles. He also believes that the "chances of strong fiscal stimulus in the U.S. have also diminished." Phacharaphot Nuntramas of Siam Commercial Bank Economic Intelligence Center in Thailand added: "U.S. economic policy action from the Trump administration has been much slower than expected."
JCER has introduced a new metric, the JCER risk signal, to better describe the severity of risks as they are conceived by economists. The score is calculated to reach 60 or more when all responding economists consider the item to be one of the top three risks, implying that the risk is viewed with "caution" (yellow). A risk is considered "alarming" (red) when the score is 70 or more.
Only "rise of protectionism" in Singapore was a risk, with a "yellow" signal in the June survey. Three months ago, there were two red signals on "protectionism" risk in Malaysia and Singapore and a yellow signal on "financial turmoil" risk from Trump's policies in Indonesia.
Economists now find other concerns in wider fields. "Terrorism/geopolitical risk" ranked second highest in the Philippines, for the first time since the September 2016 survey. The answers apparently reflect the situation in Mindanao, where President Rodrigo Duterte declared martial law in May in the wake of escalating conflict between government forces and rebel groups. "The government is strong enough to ensure that the problem will not go beyond Marawi [in Mindanao] and spread. Nonetheless, this terrorism is affecting the decision and implementation of investments in the short term," said Alvin Ang of Ateneo de Manila University.
The slowdown of the Chinese economy was one of three biggest risks for Malaysia, the Philippines, Singapore and Thailand. Political instability is considered a risk in Thailand and the Philippines.
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, chief economist, Maybank Investment Bank; Lim Chee Sing, chief economist, RHB Research Institute; Wan Suhaimie Saidie, head of economic department, Kenanga IB, Philippines: Alvin Ang, professor, Ateneo de Manila University; Jonathan L. Ravelas, FVP chief market strategist, BDO Unibank; David Fernandez, chief Asia-Pacific economist, Barclays Bank; Jojo Gonzales, head of research, Philippine Equity Partners; Pauline Revillas, Research Analyst, Metropolitan Bank & Trust; Jose Cuyegkeng, senior economist, ING Bank; Angelo Taningco, economist, Security Bank, 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; Dennis Tan, strategist, Barclays Bank, 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; Tim Leelahaphan, assistant vice president, Maybank Kim Eng Securities; Somprawin Manprasert, chief economist, Bank of Ayudhya, 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; Siddhartha Sanyal, Chief India Economist, Barclays Bank; Anubhuti Sahay, head of South Asia Economic Research (India), Standard Chartered Bank; Tirthankar Patnaik, chief strategist & head of research, India, Mizuho Bank, For multiple countries: Euben Paracuelles, senior economist, Nomura Singapore; Rahul Bajoria, economist, Barclays Bank; Edward Lee, Head of Regional Research, ASEAN, Standard Chartered Bank; Arup Raha, group chief economist, CIMB Group