CARI Captures Issue 483: ADB revises Southeast Asia’s 2020 GDP growth to 4.4% contraction


ADB revises Southeast Asia’s 2020 GDP growth to 4.4% contraction
(10 December 2020) The Asian Development Bank (ADB) has revised its GDP forecast for Southeast Asia from a 3.8% contraction in its September Update to 4.4% in 2020 in its December supplement to the Asian Development Outlook (ADO) 2020 report. It has also revised the 2021 GDP growth for the region from 5.5% to 5.2%. Economic growth in Southeast Asia remains under pressure as COVID-19 outbreaks and containment measures continue, particularly in Indonesia, Malaysia and the Philippines. GDP forecasts in 2020 are downgraded for the three countries as COVID-19 containment hampers economic recovery. Meanwhile, success in reopening economies signal better growth prospects for Brunei, Thailand, and Vietnam. Forecasts are unchanged for Cambodia, Laos, Myanmar, Singapore and Timor-Leste.

Banks warned of higher non-performing loans as pandemic-relief impact eases
(11 December 2020) Moody’s Investors Service has warned Philippine banks of potentially higher non-performing loans (NPLs) in the coming months, especially after loan payment moratoriums and other pandemic-related relief measures taper off. According to a recent sector analysis, Moody’s said that the Philippines is the only ASEAN country that saw a significant rise in NPL levels in the midst of the COVID-19 pandemic. Despite Bangko Sentral ng Pilipinas’s (BSP) recent efforts to mandate banks to help borrowers in the time of the pandemic, Philippine banks’ asset-weighted average NPL ratio rose to 3.4% as of 30 September 2020 from 2.0% a year earlier. Moody’s said the NPLs in the Philippines arose mostly from the retail and small and medium enterprise (SME) segments, which were hit hard by the pandemic. BSP officials said they project the country’s bad loans to rise to about 4.6% of their total loan portfolio by the end of 2020.

Overseas holdings of government securities rose to US$49 billion in November 2020, highest level since October 2016
(9 December 2020) Overseas holdings of Malaysian government securities rose to US$49 billion (RM198.4 billion) in November 2020, its highest level since October 2016, according to data by the country’s central bank, Bank Negara Malaysia (BNM). The month of November marked the seventh straight month of purchases and came as the Ringgit rallied 2.0% to its highest level in almost a year. “Ringgit bonds” remain attractive to overseas investors considering the large onshore investor base, a well-managed pandemic situation, and BNM’s relatively ample room for further policy changes. Malaysia’s 10-year benchmark yield measured at 2.76%, offering a 183-basis point premium over comparable US Treasuries. Investor appetite for Malaysian bonds are expected to continue due to optimism over the global vaccine rollouts and a recovery in regional trade.

Singapore and the UK sign free trade agreement
(10 December 2020) Singapore and the UK signed a free trade agreement on 10 December, which covered some US$22.4 billion in bilateral trade in goods and services between both countries. Under the UK-Singapore FTA, companies from both countries will enjoy the same benefits they are currently receiving under the EU-Singapore FTA. These would include tariff eliminations on goods trade, as well as increase access to services and government procurement markets. There will also be reductions of non-tariff barriers in sectors including electronics, motor vehicles and vehicle parts, pharmaceutical products and medical devices, and renewable energy generation. Under the new agreement, tariffs will remain eliminated for 84% of all tariff lines for Singapore exports to the UK, while Singapore will continue to bind their level of duty-free access for all UK products entering Singapore. Both countries aim to launch negotiations on a UK-Singapore Digital Economy Agreement (DEA) in 2021.

Indonesia to raise excise duties on cigarette products by an average of 12.5%
(10 December 2020) Indonesia plans to raise excise duty on cigarette products by an average of 12.5% effective 1 February 2020. Indonesia, the world’s second-largest cigarette market after China, seeks to earn US$12 billion (174 trillion rupiah) in state revenue from tobacco products in 2021, a 5.0% increase from its 2020 target. The country sets varying rates of levies depending on the types of cigarettes, from machine- or hand-rolled as well as whether they contain cloves. The government hiked the duty by 23.0% in 2020. While Indonesia seeks to reduce the number of smokers, it’s also mindful of workers who rely on the tobacco industry, which is why it won’t be raising the levy for hand-rolled cigarettes, Finance Minister Sri Mulyani Indrawati said in the a  on 10 December. The government expects cigarette production in Indonesia to decline by as much as 3.20% to 288.8 billion sticks in 2021.

Thai rubber glove makers aim for 20% share of global market
(10 December 2020) Thailand’s rubber glove industry is aiming to expand its share of the global market from 15% to 20% in the next five years. Thai Rubber Glove Manufacturers Association (TRGMA) is pushing for increased investment and improved overall competitiveness in the industry in order to meet the target. According to TRGMA president Veerasith Sinchareonkul, the long-term aim was to grab a 40% share of the world market. The move follows a 20% rise in global demand for rubber gloves to 3.6 million amid the COVID-19 pandemic with demand expected by another 10% in 2021. TRGMA is urging the Thai government to provide more financial support to help manufacturers expand investment and streamline regulations to ease the setting up of new factories. Thailand is the world’s second-largest exporter of rubber gloves, driven by 19 manufacturers with a combined production capacity of 46 billion per year.

Ho Chi Minh City seeks FDI in technology-based sectors
(9 December 2020) Ho Chi Minh City (HCM) plans to step up efforts to attract FDI by focusing on infrastructure and administrative procedures, with priority given to high-tech projects, said standing vice chairman of the People’s Committee, Le Thanh Liem. He said priority would be given to foreign investors in technology who have innovative and advanced management capabilities. According to the head of the HCM City Export Processing and Industrial Zones Authority Hua Quoc Hung, HCM City plans to offer competitive land rents and other incentives at industrial parks (IPs) and export processing zones (EPZs), and earmark more lands for building infrastructure to attract investment. The city would switch to newer models of IPs and EPZs to attract foreign investment, and ensure it has appropriate incentives during the transition process. HCM City received US$3.81 billion worth of FDI in the first 11 months of 2020, accounting for 14.4% of the country’s total FDI during the period.

Singapore set to host world’s first electric-powered air taxi service by 2023
(9 December 2020) Singapore is set to host the world’s first electric-powered air taxi service by end-2023. The vertical-takeoff craft is being developed by German company Volocopter GmbH, and it hopes to commence operations once it completes flight trials, evaluation and certification in collaboration with the Singaporean authorities. Singapore is at the forefront of plans to introduce flying taxis thanks to a more welcoming regulatory ecosystem than in other countries. Volocopter chief executive Florian Reuter stated that local capabilities in battery research, material science and route validation for autonomous operations will be central to the project. Volocopter, which counts computer chip manufacturer Intel Corp. and automakers Daimler AG and Geely as investors, plans to set up a team of 50 pilots, engineers and operations specialists to support the Singapore flights.

Cambodia eyes opportunities in the Chinese market through mango exports
(10 December 2020) As China’s support for Cambodia’s agricultural development continues to increase, more high-quality agricultural products, including mangoes, will be directly exported to China. According to Cambodia’s agriculture minister Veng Sakhon, the upcoming export of fresh mangoes to China will contribute to economic growth and poverty reduction in Cambodia’s rural areas. He said the country has planted more than 124,000 hectares of mango trees, yielding around 1.44 million tonnes of fresh mangoes per annum. Huang Kejin, managing director of Cam MJ Industrial Park, which includes a dried mango processing factory, is optimistic about the export prospect of Cambodia’s dried mangoes to China. He said that in 2021, a total of three dried mango processing lines in the park will be put into operation, requiring about 42,000 tonnes of mangoes a year.

Laos pledges to achieve economic goals in next five years
(9 December 2020) Laos intends to carry out its economic reforms from now until 2025 to ensure sustainable and quality growth of its GDP. An annual economic growth rate of 4.0%-5.0% has been set as the target for 2021-2015, with inflation of not more than 6.0% per year. According to deputy prime minister Sonexay Siphandone, there are several goals to be achieved in the next five years. These include boosting national revenue, minimising loopholes for financial leaks and wisely using natural resources. Laos’ economy is projected to grow by 3.3% in 2020 due to the COVID-19 pandemic which has disrupted economic activities and slowed the growth of the service sector. The pandemic has resulted in rising unemployment, with the rate currently at about 20%, and the government has pledged to address this issue. One of the main challenges for Laos is the rising debt burden and fluctuating currency exchange rates.

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