World Bank Foresee An Acceleration of Growth in EMDEs in 2020

The World Bank in its latest report on Global Economic Prospects (GEP) projected global GDP growth to recover slightly to 2.5% in 2020, marginally higher than the estimation of 2.4% in 2019. However, this was revised downward by 0.2 percentage points from its earlier projection of 2.7%. Global GDP growth is expected to show slight improvement, partly supported by the recent policy action, particularly those that have softened trade tensions which lead to possible sustained reduction in policy uncertainty. Nevertheless, apart from recent geopolitical risk, the possibility of reescalation of global trade tensions, sharp slowdown in main economies as well as financial disruptions in emerging market and developing economies (EMDEs) would lead to some downside risks pressure on the global growth.

According to World Bank, the slightly higher global GDP growth in 2020 will be supported by the emerging market and developing economies (EMDEs), which is expected to accelerate to 4.1% in 2020 from 3.5% estimated for 2019. However, among the EMDEs’ component, East Asia and Pacific region is likely to slowdown to 5.7% in 2020 from 5.8% in 2019, weighed down by China, forecasted to slow by 5.9% in 2020, from 6.1% estimated in 2019. Meanwhile, in the Asean region, Indonesia and Thailand are expected to improve to 5.1% (5.0% in 2019) and 2.7% (2.5% in 2019) respectively in 2020.

Meanwhile, World Bank projects Malaysia’s GDP growth to moderate from 4.6% in 2019 to 4.5% in 2020. This was reduced from an earlier projection of 4.6%. As for Philippines, GDP growth for 2020 is expected to rise by 6.1% following an estimated 5.8% increase in 2019. However, World Bank cuts slightly the forecasts for nearly every country in the Asean region.

Separately, despite some downside risk to global growth, we believe the Asean region’s domestic demand will remain healthy in 2020. For instance, Indonesia’s consumer confidence index increased further to 126.4 in December as compared to 124.2 in November, suggesting that consumers are confidence with the country’s economy, mainly due to the improved perception on availability of job, earnings as well as the purchase of durable goods. Going forward, we believe Indonesia’s economy will likely to improve with the assistance of government measure announced during Budget 2020 to support the country’s growth. Some of the supportive measures are the proposed new social security cards to support the low-income earner, with Government’s allocation of around US$3.17bn for these program.

Most region Budget measures for 2020 include some stimulus measures that could supports its country’s private consumption and partly mitigate the downside risk of external factors.

Source: Affin Hwang Research - 10 Jan 2020