SINGAPORE -- Southeast Asian economies should collectively grow by around 5% this year and next, propelled by such fast-growing contributors as the Philippines and Vietnam, a regional observer group says in a report released Thursday.
Real gross domestic product is likely to grow by 4.9% in 2017 and 5.1% in 2018 in the Association of Southeast Asian Nations bloc on healthy domestic demand, reports the ASEAN +3 Macroeconomic Research Office, or AMRO. The average growth rate from 2014 to 2016 was 4.2%.
Purchases of durable goods such as automobiles are expected to increase as the middle class expands, driving annual growth of more than 3% in individual consumption. For much needed infrastructure such as roads and harbors, however, investment is seen remaining only in the 1% range.
Speedy growth in economies such as Vietnam and the Philippines stands out among the group. AMRO projects annual growth exceeding 6% in Vietnam, where low wages and highly educated workers have enticed global companies including Intel. Some stock market players anticipate further growth there as the European Union is scheduled to begin cutting tariffs on Vietnamese goods as early as 2018.
AMRO forecasts that growth will rise to 7% in 2018 for the Philippines under President Rodrigo Duterte. Optimism is building for more direct investment by foreign businesses there amid government efforts to improve public safety, and overseas money is already flowing into the stock market.
Myanmar's economy, under de facto leader Aung San Suu Kyi's National League for Democracy, is also expected to grow by more than 7% for 2017 and 2018. Meanwhile, China is likely to see its 7% growth slow to the low 6% range, while Japan probably will reach only the 1% range.
AMRO also sees potential for trouble, including from U.S. President Donald Trump's protectionist trade policies and interest rate hikes by that country's Federal Reserve, as well as accelerating inflation.
Some 20 years on from the Asian financial crisis, AMRO says the region has grown exceptionally strong financially, with deeper foreign currency reserves and new lending mechanisms in place.
The Singapore-based AMRO became an international organization in February last year, and has a regional role akin to that of the International Monetary Fund. It oversees the region's Chiang Mai Initiative multilateral currency swap arrangement and monitors and advises members on fiscal policy.