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Trump shock hits Asian economies differently

Impact strong in Singapore, weaker in Philippines, India

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Clouds gather above the Marina Bay Sands resort in Singapore.   © Reuters

TOKYO -- Donald Trump's victory in the U.S. presidential election has cast various doubts over Asian economies, ranging from the possibility of rising protectionism to renewed financial market turmoil. For now, it appears the impact will differ by country. Economists revised their 2017 growth forecasts downward for four Southeast Asian countries -- Indonesia, Malaysia, Singapore and Thailand -- partly reflecting the Trump factor, while the prospect was revised up for the Philippines. India's forecast was revised down for 2016/17, but this is just as much a reflection of the temporary effects of demonetization, a new survey shows.

The Japan Center for Economic Research and the Nikkei conducted a quarterly consensus survey from Dec. 2 to 16, collecting 57 answers from economists and analysts in the five biggest economies in the Association of Southeast Asian Nations and India.

Many economists throughout the region share the view that anxiety over protectionism has been raised and volatility in the markets has increased after Trump's November victory. The effects are "mainly on capital outflow and the possibility for protectionism," said Umar Juoro, chairman of Center for Information and Development Studies in Indonesia.

Singapore, which has enjoyed no uncertain prosperity on the back of an open economy, has already felt the effects of the Trump shock, according to the survey. The average growth forecast for 2016 was revised down to 1.4% from 1.8% in the previous survey in September. The forecast for 2017 was also revised down. "Singapore's ultra-open economy and financial center will likely be one of the most exposed to ... the threat of trade protectionism," said Nomura Singapore's senior economist Euben Paracuelles.

The forecasts for Malaysia and Thailand for 2017 were also revised down. Both economies are export oriented. Somprawin Manprasert, chief economist at Bank of Ayudhya in Thailand foresaw a direct impact on bilateral trade and an indirect one, "both issues could hurt Thai exports."

Forecasts for Indonesia for 2016 and 2017 also came down, but the country is expected to speed up growth at more than 5% through 2018. It is "supported by moderate growth of private consumption, government spending and investment," said Juniman, chief economist of Maybank Indonesia.

The prospects are stronger for the Philippines. The forecasts were revised up to 6.6-6.9% through 2018. Both public and durable equipment investments "can help boost construction," said professor Alvin Ang of Ateneo de Manila University.

India's growth rate is expected to fall for the fiscal year through March 2017. The drop is mainly attributed to the country's demonetization drive, which was announced in November and banned the use of 500- and 1,000-rupee bank notes. The government argues that the policy will tackle money laundering, tax evasion, and other problems. It has already "reduced the currency in circulation sharply," said Dharmakirti Joshi, chief economist of Crisil in India. In the longer term, however, economists see the policy boosting the economy. "The benefits will be felt over a period of time," he added.

Views on the risks posed to the respondents' own economies also differed by country. The rise of protectionism and other risks are taken less seriously in India and the Philippines than the four countries for which forecasts were revised downward.

Nine months ago in the March survey, declining economic reform prospects, the slowdown of the Chinese economy and market-related risks were seen as the three biggest risks throughout the region. Market risks received more attention in the June and September surveys, reflecting rising uncertainty following the U.K.'s decision to leave the European Union in June.

Various categories of Trump-related risks join the list included in the December survey. The rise of protectionism and a slowdown or decrease in world trade was cited as the biggest risk for Singapore and Thailand and the second biggest in Malaysia and Indonesia. Financial turmoil triggered by the policies of president Trump was seen as the third-biggest risk for Malaysia.

The situation is different for the Philippines and India. Economists focused more on domestic risks, such as political instability and infrastructure insufficiency in the Philippines. Decline in reform prospects and political instability are the second- and third-biggest risks for India. Richard Iley, chief economist of emerging markets at BNP Paribas sees "relatively low openness and trade exposure to the U.S." behind smaller recognition of Trump-related risks in India.

The currencies of all six countries slid down against U.S. dollar after the election. Many economists see the pressure increasing to depreciate Asian currencies. "The Fed rate hike and fiscal expansion plan of the U.S. would increase U.S. interest rates," and it "would put pressure on the USD/IDR exchange rate," said Yose Rizal Damuri, head of the department of economics at the Centre for Strategic and International Studies in Indonesia.

Market-related risks are recognized as important. Repercussions of U.S. monetary policy are seen as the biggest risk for Indonesia. Capital outflow is the largest risk for Malaysia and a rise in commodity prices is the most prominent risk for India.

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; Yose Rizal Damuri, head of department of economics, Centre for Strategic and International 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 economic research, 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; Emilio S. Neri Jr., lead economist, Bank of the Philippine Islands; Victor Abola, senior economist, University of Asia and the Pacific, Singapore: Manu Bhaskaran, CEO, Centennial Asia Advisors; Randolph Tan, associate professor, SIM University; Hayato Nakamura, 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, senior economist, KT Zmico Securities; Tim Leelahaphan, economist,  Maybank Kim Eng Securities; Somprawin Manprasert, chief economist, Bank of Ayudhya; Nalin Chutchotitham, Thailand economist, HSBC, India: Kentaro Konishi, president and CEO, Daiwa Capital Markets; Dharmakirti Joshi, chief economist, Crisil; Sonal Varma, chief India economist, Nomura India; Richard Iley, chief economist emerging markets, BNP Paribas, For multiple countries: Euben Paracuelles, senior economist, Nomura Singapore; David Fernandez, Managing Director, Barclays Bank, Singapore; Philip McNicholas, senior economist, BNP Paribas

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