The International Monetary Fund (IMF) has just issued its latest World Economic Outlook, and it makes for a decidedly downbeat reading. Following the outbreak of war in Ukraine, the IMF revised global growth down for this year and next — it expects just 3.6% growth in world output for both 2022 and 2023, compared to its original forecasts of 4.4% and 3.8% respectively. Not surprisingly, inflation is also seen to be higher, with emerging economies suffering more than advanced economies. To add to the gloom, the IMF emphasised that the risks were mostly to the downside.
What’s striking is that, in the midst of this pessimism, the IMF had relatively less gloomy projections for Southeast Asian economies. While growth in the region is seen as taking a hit, the downward revision was just 0.3 percentage point in 2022 and 0.1 percentage point in 2023. In short, the Asean economies are seen as suffering much less from the shocks in the global economy than other regions.
The big question for us is: Will this resilience be sustained given the downside risks that the IMF and many others are rightly worried about? Our view is that five big factors will determine Asean’s economic outlook. The first three are negative — the Ukraine war’s impact; global monetary tightening led by the US Federal Reserve; and China’s unsteady prospects. But the other two are more supportive of Asean — the evolution of the Covid pandemic to a more benign impact on economies and structural forces specific to the region that are likely to promote economic growth. Putting it all together, we believe that Asean economies can indeed continue their relatively better performance compared to the rest of the world.
