Growth Will be Driven by Emerging Asia Economies

in the latest World Economic Outlook (WEO) published by the International Monetary Fund (IMF), it remained upbeat on the global growth outlook as cyclical upswing will likely continue into 2018, despite the trade tensions. IMF projected the global GDP growth to stay unchanged at 3.9% in 2018, after the upgrades in January 2018, due partly to positive impact from US tax cut, as well as expectations that commodity exporters countries will gradually improve on the back on recovery in commodity prices. However, IMF also warned that the current trade tensions between US and China could drag global GDP growth lower, especially with an escalating cycle of trade restrictions and retaliation. IMF added that “conflict could intensify if fiscal policies in the United States drive its trade deficit higher without action in Europe and Asia to reduce surpluses.” On Asean-5, the region GDP growth was also kept unchanged at 5.3%, after the upward revision by 0.1ppt in January 2018. In particular, Singapore, Thailand and Malaysia were revised higher by 0.3, 0.4 and 0.4 ppt respectively, while Philippines and Indonesia remained unchanged. According to IMF, the global growth will continue to be driven by emerging Asia, led by China and India.

Separately, the advance estimate released by Singapore’s Ministry of Trade and Industry (MTI) showed that the country’s real GDP growth expanded by an annualized rate of 1.4% qoq in 1Q18, slower than 2.1% qoq in 4Q17. However, on a yoy basis, real GDP growth expanded by 4.3% yoy in 1Q18, higher than 3.6% in the previous quarter. Higher yoy growth was driven by manufacturing sector, which grew by 10.1% yoy during the quarter, as compared to 4.8% yoy in the previous quarter. However, construction sector continued to contract by -4.4% yoy in 1Q18, albeit slightly lower than 5% decline in 4Q17. On services producing industries, growth expanded further by 3.8% yoy in 1Q18 (2.8% in 4Q17), led by the finance & insurance, as well as wholesale and retail trade sectors.

In Indonesia, Bank Indonesia (BI) maintained its main policy rate unchanged at 4.25%, as expected for the eight straights meeting. Similarly, deposit facility rate and lending facility rate were both kept unchanged at 3.5% and 5% respectively. According to the central bank, the country’s growth is expected to expand in the 5.1-5.5% (yoy) range for 2018. However, BI cautiouned that the “downside risks are related to the impact of the continuing process of normalising US monetary policy in the form of an increase in the interest rate of FFR and the reduction of central bank balance, inward-oriented trade policy, and geopolitic factors especially in the Middle East.”

Source: Affin Hwang Research - 20 Apr 2018