With the exception of Thailand, the five largest economies in Southeast Asia (ASEAN-5) will show lower growth this year. The main reasons for this are tight financial conditions and weak external demand, according to Atradius.
Growth of private consumption and business investment will slow in Indonesia, but high levels of commodity exports will mitigate the growth slowdown. Later this year, private investment will benefit from the amended Omnibus Law, especially in the construction and mining sectors. GDP growth is expected to slow to 3.6% in 2023 from 5.3% last year.
Thailand’s GDP growth will accelerate this year. The number of tourism arrivals is expected to rise, resulting in income growth. Thailand’s economy has in recent years been growing slower than the other ASEAN-5 economies and will feel headwinds also this year. Atradius expects the real GDP will rise to 4.0% this year, up from 2.6% last year.
A lingering risk for Thailand’s economy is the high level of household debt, which rose to almost 90% of GDP during the pandemic period. In the long run, the high household debt might affect private consumption and derail the financial sector in the event of rising interest rates or falling income.
The Philippines will see a growth slowdown from last year’s strong performance, which will last a bit longer than in most Asian economies. The prospects for external demand remain tepid, which bodes poorly for the export sector. GDP growth, which reached a strong 7.6% last year, will probably slow to 4.1% this year.
Economic growth in Malaysia will weaken this year primarily due to declining external demand. Government projects and private investment in residential development will support the economy in 2023, but weak exports are likely to weigh on business investment. Real GDP growth this year is expected to fall to 2.7%, the lowest growth rate in Asia after Japan and South Korea.
Vietnam saw its GDP grow at 8.0% last year, the fastest pace in 25 years. However, the export-oriented manufacturing sector has been hit by weak external demand, which is spilling over into the domestic sectors, including mass layoffs in the textile and other sectors. The growth this year will amount to 4.0%, Atradius concludes.
Read the full analysis HERE.
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