Internal factors can derail ASEAN growth
Internal factors can derail ASEAN growth
SINGAPORE (AFP): Although the engines of Southeast Asian
economies will continue to power ahead in the second half of the
year, driven by strong intra-regional trade, domestic political
uncertainties could nonetheless derail growth, economists have
warned.
"It's more a function of local factors which will probably
affect sentiment," said Song Seng Wun, a regional economist at
research and brokerage house G.K. Goh.
"Domestic demand, which has been supporting growth recovery,
may be capped by the increasing political uncertainty," he said.
Indonesia, being the most populous country in the region,
wields the biggest influence on the fortunes of its neighbors,
analysts say.
Three years after the Asian financial crisis struck, the
Indonesian economy is still in limbo, with national debt
accounting for more than 80 percent of its gross national
product. This is despite a US$46 billion bail-out package from
the International Monetary Fund.
"Domestic events will determine outlook," warned investment
research house Vickers Ballas in its latest outlook for the
regional economies.
"The government remains committed to economic reform, but must
speed up implementation to regain investors' confidence," it
said.
President Abdurrahman Wahid's efforts to push ahead with vital
economic reforms have been hampered by ongoing religious and
ethnic tensions, economists said.
For all the despair surrounding the Indonesian economy,
economists noted some positive signs, including a 75 percent jump
in first quarter oil exports over 1999, and a 30 percent rise in
non-oil exports.
Vickers Ballas is projecting Indonesia's economy to grow 3.9
percent this year, down from its previous forecast of 4.2 percent
but up from last year's growth of only 0.3 percent.
Thailand, the country that dragged the region into financial
meltdown after the collapse of the baht in mid-1997, is
recovering steadily on the back of strong exports.
Singapore's economic recovery remains on track, and the
government has revised upwards its full year growth forecast to
5.5-7.5 percent from 4.5-6.5 percent previously.
The new forecast, which came after the economy grew 9.1
percent in the first quarter of the year from 1999, takes into
account of the possibility of a hard landing in the US economy.
Vickers Ballas has revised downwards it growth forecast of the
Philippines' economy to 3.3 percent, from 3.9 percent.
"The concern is growing political unrest, which has affected
investors' confidence and led to a weakening peso," it said.
The Malaysian economy is expected to rise 7.4 percent this
year, up from 5.6 percent in 1999.
The United States remains the biggest export market for the
region, but waning dependence on the Americans will mitigate the
impact of a slowdown in the world's largest economy, economists
said.
"While the US remains the single largest market for Asia's
exports, the links between the US economy and Asia have weakened
considerably over the past decade due to the rapid rise of intra-
regional trade," Vickers Ballas said.
Japan's continuing economic recovery and expected strong
growth within the European Union will make up for the slack in US
growth, economists said.
"We see Japan and EU doing better. That will provide export
markets for Asia," said Gerard Teo, a Singapore-based regional
economist and strategist for ABN Amro bank.