Malaysian research house forcasts modest growth for ASEAN economy next year

While countercyclical policy stimulus and fading trade headwinds are to lift global growth prospects in 2020, economic growth among members of the Association of Southeast Asian Nations (ASEAN) is expected to remain sub-optimal, according to a Malaysian research house on Thursday.

The CGS CIMB said in a report that it expects healthier economic prospects across Asia in 2020, primed on an uptick in exports and investments.

"China's growth trajectory provides a floor to economic activity in the ASEAN region," said the agency.

According to the report, Asia had weathered through a turbulent period of uneven growth and escalating trade tensions as policy space was ample and imbalances in the private and public sector remained manageable.

"Private consumption has broadly held up as policy interventions and stimulus have helped to mitigate external shocks to domestic labor markets," it added.

The research house also highlighted that signs had emerged of a burgeoning recovery in overall trade and manufacturing activity.

"This should bode well for exports in Malaysia, Thailand and Singapore, as well as commodity prices, benefiting raw material commodity exporters like Indonesia, Malaysia and, to a lesser extent, Thailand," it said.

While pockets of imbalances remained, the agency opined that easing balance of payment strains offered more policy flexibility to ASEAN policymakers, reduced capital flight and currency risks, particularly to Malaysia and Indonesia.

"Among the economies, we think Malaysia and Thailand still have ample policy space to loosen monetary conditions going forward, as reflected by their current real interest rates relative to the average," it added.

Central banks in ASEAN recalibrated monetary policy in 2019 to counter downward risks to the growth and inflation outlook, with Bank Indonesia being the most aggressive and Bank Negara Malaysia the least, according to the report.

The CGS CIMB anticipated a mild recovery in Singapore with its gross domestic product (GDP) growth to improve to 1.5 percent next year, from 0.5 percent this year, underpinned by improved trade outlook.

Dissipation of political uncertainty, reorientation of fiscal resources and stabilizing commodity prices should also lift Indonesia GDP growth to 5.1 percent in 2020, it said.

While abating export headwinds, fiscal and monetary stimulus, improvement in business and consumer sentiment are positive catalysts for Thailand, the research house also think that Thailand's economy growth might rise marginally to 2.9 percent next year, from 2.5 percent this year.

However, it foresaw growth prospects to remain subdue for Malaysia, with projected growth to fall slightly to 4.4 percent next year, from 4.5 percent this year, as a mild recovery in exports and investments might not be sufficient to counter weaker growth in private consumption.

Source: China ASEAN Business Council