However, ADB Warned Certain Risks to This Outlook Require Monitoring

The Asian Development Bank (ADB), in its latest issue of the Asian Deevelopment Outlook (ADO), revised upward its 2018 GDP growth outlook projection for the Asean by 0.1 percentage points from 5.1% projected in the September’s ADO update report to 5.2% (the same rate of growth as 5.2% in 2017). The upward revision for Asean region’s economic growth was attributed to better economic prospects for Philippines, Singapore and Thailand, where the growth was projected to expand further by 6.8%, 3.1% and 4% respectively. Phillipines’ GDP growth was revised higher by 0.1 percentage point, due to its healthy domestic demand on higher Government expenditure for it’s infrastructure projects.

Similarly, for Singapore, the country’s GDP growth was revised higher as well, by 0.4% percentage points to 3.1%, which contributed from manufacturing sector, albeit slower from 3.6% in 2017. Meanwhile, Indonesia’s GDP growth remained unchanged at 5.3%, while Malaysia’s GDP growth was revised downward slightly to 5.3%. In the report, ADB also cautioned on several downside risks to developing Asia, such as the threat from rising trade tensions, where the move away from trade openness is worrying, and further measures and counteractions could dent business and consumer confidence. ADB also warned that “capital flows to the region could diminish if the US Federal Reserve raises interest rates faster than expected to keep fiscal stimulus there from igniting inflation.” However, ADB also noted that “strong trade links within Asia and built up financial buffers in many Asian economies, especially commodity exporters, should be in a strong position to withstand most shocks.”

Separately, Philippines’ exports declined further in February by -9.6% (-4% yoy in January), significantly lower than market expectations of 6.4%. We believe this was partly due to seasonal factor, as Lunar New Year fell in February. The same trend has been seen in other Asean countries as well, where exports in Malaysia, Philippines, Singapore, Thailand also slowed in the month of February. By components, the decline in Philippines’ exports was attributed mainly from manufactures good, which has the highest share in exports basket. Electronic goods slowed from 10.8% yoy in January to 4.6% yoy in February, dragged by lower demand for semiconductor goods (8.5% vs 16.9% yoy in January). In contrast, imports continued to grow strongly by 13.2% yoy in February (7.7% in January), albeit lower than market expectations of 16%. The strong import growth was reflected across the board. This was led by capital goods (24.5% vs 16.9% yoy in Jan), followed by consumer goods (20.3% vs 8.1% yoy in Jan). As imports continued to exceed exports value, trade deficit in February remained high at US$3.1bn.

Source: Affin Hwang Research - 13 Apr 2018