Deloitte Report Examines SE Asian Economies

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Macroeconomics

In the spirit of economic forecasts (we seem to have reported on a few recently), this one from Deloitte Research examines the Southeast Asian economies of China, Indonesia, Malaysia and Vietnam.  The report examines several variables within each economy including anticipated growth for 2009 (both country specific bank forecasts and government pronouncements as well as international growth expectations as reported by the IMF), fixed asset investment levels, interest rates and discussion on the prospects for each country.
We put together a little comparison table in terms of expected growth rates and real interest rates:

Data Courtesy of Deloitte Research

China growth rates have slowed, according to the study primarily for two reasons: depressed external markets (e.g. exports) and weak internal markets. Unemployment rates appear flat according to official reports but as the Deloitte report suggests, the numbers are not inclusive of migrant workers who have lost their jobs and may number in the millions.  8% growth represents the minimum threshold to keep people working. Anything less than that creates unemployment. The report also suggests the amount of bank lending as part of the country’s stimulus package may be risky especially combined with reduced capital requirements on the part of borrowers. MetalMiner has also reported these findings previously. Perhaps the most poignant comment from the entire report, there is no data suggesting a sustainable upward trend, says it all.

Indonesia on the other hand has grown rapidly. And though exports have fallen, because the Indonesian economy is less reliant on exports as a portion of its GDP, it has suffered less than others in this downturn. Consumer confidence remains high. The report points to only a couple of areas of concern. The first, remittances or monies sent from overseas family members back home have dropped as some overseas workers have lost their jobs. Second, the oil price has a big impact on the economy as Indonesia is a net importer. But oil prices have come off since the report was published in June.

Malaysia, on the other hand, looks a little more like China in that it is more heavily reliant on exports for growth. Banks also suffer from under-capitalization and stimulus plans may be more longer term in nature and won’t spur more immediate economic growth.

Vietnam, also has a similar economic profile to Malaysia and China in that the economy relies heavily on exports. While retail sales have held, the report mentions capital imports falling, as well as a significant drop in foreign direct investment. This could reduce producer sentiment.

Though the SE Asian economies represent a mixed growth forecast, we’re starting to draw the conclusion that China will not lead the world out of the global slump, at least not in the near term.

–Lisa Reisman

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