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Kuala Lumpur / DPA
The growth prospects of Asean major export-orientated economies of Singapore, Malaysia and Thailand are expected to remain weaker than its domestic demand-driven economies, says Moody’s Investors Service.
The international ratings agency said that hence growth outlook of Asean economies was likely to diverge in 2016 and 2017, against the backdrop of subdued global demand.
A Moody’s vice president and senior research analyst Rahul Ghosh said Singapore, Malaysia and Thailand’s growth prospects would remain weaker vis-a-vis those of Indonesia and the Philippines in 2016 and 2017.
“Singapore, Malaysia and Thailand are susceptible to a prolonged period of subdued global demand via both the export channel and weaker investment demand,” Ghosh said.
“We forecast G20 GDP growth at 2.6 per cent in 2016, similar to last year and rising to only 2.9 per cent in 2017. And downside risks to global growth are increasing,” he added.
Vietnam (B1 stable), meanwhile, will remain a regional growth outperformer on the back of robust manufacturing activity and strong foreign direct investment flows.
Export growth is slumping across the region; however, the overall economic impact will vary based on the relative importance of trade to GDP.
According to Moody’s, total trade – the sum of exports and imports – accounts for 346 per cent, 131 per cent and 130 per cent of GDP in Singapore (Aaa stable), Malaysia (A3 stable) and Thailand (Baa1 stable), respectively, which is much higher than the 41 per cent recorded for Indonesia (Baa3 stable) and 58 per cent for the Philippines (Baa2 stable).
Ghosh was speaking on Moody’s just-released edition of Inside Asean, which also examines the implementation of major policy reforms in Malaysia, which have mitigated the negative impact of lower oil prices on the government’s
fiscal position.
Moody’s noted that external pressures – including increased capital flow volatility and consequent exchange rate depreciation – have led to a deterioration in Malaysia’s growth and external metrics thereby supporting Moody’s earlier decision to revise the sovereign rating outlook to stable from positive.