(From Nikkei Asian Review)
Southeast Asian economies are slowing. Gross domestic product in the region’s five main economies grew at a real 4.2 percent during the April to June period, down 0.2 of a percentage point from the first quarter of 2015. China, whose own boggy economy is soaking up fewer imports, is one reason. Slack domestic demand is another.
The figure represents a weighted average of the growth rates of Indonesia, Malaysia, the Philippines, Singapore, and Thailand. According to the Asian Development Bank, the decline is largely attributable to weakness in Malaysia and Thailand, whose exports are being particularly hard hit by China’s loss of appetite.
The bank said that since the region’s slowdown for the first two quarters of the year was deeper than expected, it might have to review its forecast of 4.6 percent annual growth.
As for the Philippines, its GDP grew at a 5.6 percent clip during the second quarter, up slightly from the January to March period but not as strong as its 2014 performance. The government is targeting 2015 growth at 7 percent to 8 percent.
Consumer spending, which typically accounts for about 70 percent of the country’s entire economy, grew 6.2 percent.
In Malaysia, weak exports seem to be affecting domestic consumption. Its exports for the second quarter declined 3.7 percent from the year earlier. Prices for crude oil and palm oil, the country’s main products, have dropped as demand from China has dissipated. Petronas, a leading Malaysian oil company, said it will reduce its capital spending due to tumbling profits.
Malaysia’s currency, the ringgit, meanwhile, has weakened to its lowest level since the Asian currency crisis, which struck in 1997. A weak currency makes imports more expensive, and this reality is beginning to show up in the consumer price index.
“The outflow of funds may accelerate if concerns over a rate hike by the U.S. Federal Reserve are heightened,” said Makoto Saito, a researcher at NLI Research Institute.
Indonesia’s economy is also feeling the negative impact of a weakening currency. Its April to June growth rate came in below 5 percent for the second quarter in a row. With current account and budget deficits, the rupiah is hovering at 17-year lows. The consumer mood has been soured by higher prices for imports and steeper interest rates. Many manufacturers, concentrated in urban areas, have decided to reduce or suspend production.
The Thai government, meanwhile, has revised its growth projection for 2015 down to 2 percent to 3 percent from 2.7 percent to 3.2 percent, due to weak exports and consumption. The country’s central bank has cut rates twice so far this year, each time failing to get the economy to budge. Now tourism is on the wane, following the deadly terror attack in central Bangkok on Aug. 17.
Tourism is one of the country’s few promising revenue sources.
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