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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.


Southeast Asia Is Riding a Global Trade Boom

Tuesday, December 19, 2017 > 11:12:38


Southeast Asian nations are riding a global trade boom that’s set to underpin solid economic growth next year, supporting the region as it embarks on monetary policy tightening and braces for a spate of elections.

The Philippines and Vietnam will remain the star performers in 2018, with economic growth projected to exceed 6 percent again, according to the median forecasts of economists surveyed by Bloomberg. Most of the region’s top six economies are set to sustain 2017 momentum, with growth in Indonesia seen mildly firmer at 5.3 percent next year, while Singapore and Malaysia will probably moderate.

Export-reliant Southeast Asia is ending 2017 on a high note, counter to fears at the start of the year that a U.S.-China trade war could blow up supply chains and send the region into disarray. Malaysia, Thailand and Singapore all posted third-quarter gross domestic product growth that was faster than at any time since 2014 and earlier.

While growth may ease from this year’s breakneck pace, the expansion that’s been concentrated in trade-dominated industries, such as manufacturing, should broaden out to other sectors in the economy. Combined with a benign inflation outlook, that’s set to support a gradual pace of monetary policy tightening across the region.

Here’s a rundown of what to watch for in the region next year:

Monetary Policy

Central banks in the Philippines and Malaysia are seen as the two most likely to raise interest rates next year, while Singapore may also move away from its neutral policy stance. It’s less clear what Indonesia and Thailand will do.

Morgan Stanley economists predict the Bank of Thailand will probably stay on hold in 2018, with Bank Indonesia raising rates. It’s vice versa for Credit Suisse Group AG economists, who predict Indonesia will stay on hold and turn to macroprudential measures to spur lending, while Thailand is seen hiking.

Fiscal Plans

Governments across the region -- particularly in the Philippines and Indonesia where economies are more reliant on domestic sources of growth than exports -- are spending more on road, rail and port projects to expand capacity, helping to underpin growth.

To keep their budget deficits in check, authorities are pushing to boost revenue from taxes. Philippine lawmakers last week ratified a tax bill that cuts some income taxes while raising levies on coal, vehicles and other goods. Indonesia is clamping down on tax dodgers, while Singapore is considering adjustments in its budget next year.

Consumer Recovery?

Household debt in parts of the region could hold back faster consumption and the broadening out of expansion, according to Taimur Baig, chief economist at DBS Group Holdings Ltd. in Singapore.

“The worst case is, there are some macro shocks and these households already saddled with high debt stop consuming in an exuberant manner, so you have a drag on consumption,” he said.

Consumers in Singapore, Malaysia and Thailand have higher debt burdens compared to others in the region, with central banks in the latter two countries citing financial stability risk as a factor in deciding policy.

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