Bloomberg Economics Analyst: Indonesia and Philippines to Outperform ASEAN

According to the Bloomberg Economics analyst, the Philippines and Indonesia show more potential for recovery than their ASEAN counterparts.

With many world factors that have threatened the economy—from the ongoing war between Russia and Ukraine to the COVID-19 pandemic, as well as the lockdowns in China, it looks like the economic recovery in Southeast Asia will be much slower—that is, with the exception of Indonesia and the Philippines.

In fact, they may even outperform their ASEAN (The Association of Southeast Asian Nations) counterparts, according to Singapore-based Bloomberg Economics analyst Tamara Henderson.

Economic Reopening Due to the Pandemic

“We don’t expect recovery to be derailed because we have simultaneous pandemic reopenings helping to cushion the blow. Prior to China [lockdowns], ASEAN growth averaged 5.1%—only slightly less than the 5.3% projection in November,” Henderson explained in a virtual webinar on Tuesday.

Henderson, who covers the ASEAN area for Bloomberg Economics, further adds that Indonesia and the Philippines have more potential to post a strong recovery on the basis that they are “more domestic demand-driven.” Moreover, the element of their outperformance includes the delay in the two countries’ economic reopening—relative to the rest of the region.

On the other hand, Henderson says that Singapore and Thailand were identified as laggards because they “are seen as more vulnerable or are likely to register slower growth due to China’s prolonged lockdowns.” Reasons for this include Singapore facing trade disruptions—having less reopening left to do—while Thailand remains reliant on Chinese tourism.

The Road to Recovery

Thankfully, most countries are now adjusting to the pandemic and the mortality rate has decreased since then. “The good news is that the global weekly death toll is down—the lowest since March 2020—despite the emergence of new variants,” she said.

However, not all economies in Asia are reopening. Take for example China, who has yet to abandon its zero-COVID strategy. “Its transition to living with COVID could take another year or even longer,” she explained. “As China reopens, we will see headwinds turn to tailwinds, but probably not a story for this year.”

The Bloomberg Economics further added that the economic reopening and unleashing of pent-up demand will underpin growth in the region.

Meanwhile, in Europe, the ongoing war between Russia and Ukraine will continue to hamper the global economic recovery. “This is not the first time Russia has moved in on its neighbors; however, the impact is different because of the degree of sanctions on Russia, not without cost for the global economy,” she said, alluding to commodity price shocks—notably in oil and fuel.

“This is going to be more problematic for countries with a larger share of low-income households. It benefits commodity exporters—we have both of these in Oceania,” she added.

Inflation and Rate Hikes

The aforementioned factors have not only taken a toll on the prices of commodities, but also on the capital flows and finances of each respective country. “In the US, all eyes are on inflation. The [Federal Reserves] Fed is working to get its credibility back, and it may have to force a recession to get inflation under control,” she said.

Thus, Bloomberg Economics expects the Fed to continue with rate hikes⁠—up until its funds rate goes to 3.5% by the end of 2022. On the other hand, in Southeast Asia, she said that capital flows may become an issue unless the central banks move more or less like the Fed. “I don’t see all ASEAN central banks moving dramatically as the Fed this year,” she said. “However, the Philippines started its rate hike last week with inflation well above target.”

In fact, Bloomberg Economics said that it expects the Bangko Sentral ng Pilipinas to hike by 200 basis points⁠—the rate in which changes of interest rates are measured⁠—between 2022 and 2024.


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