CARI Captures Issue 510: JCER/ Nikkei Survey: The slowdown of Asian economies predicted, with COVID surge putting the brakes on Thai and Malaysia growth
ASEAN
JCER/ Nikkei Survey: The slowdown of Asian economies predicted, with COVID surge putting the brakes on Thai and Malaysia growth
(5 July 2021) Economists are predicting a slowdown in the growth of Asian economies, as a surge in COVID-19 cases and contagious variants hinder recovery, according to a survey of quarterly consensus from economists and analysts conducted by the Japan Center for Economic Research (JCER) and Nikkei in June. Thailand’s economy is expected to show a meek 1.9% recovery in 2021; the lowest rate among major countries in Southeast Asia. Malaysia had the sharpest downgrade in the growth forecast among the five ASEAN nations surveyed, suffering a 1.2% point downward revision to its growth rate forecast to 4.1%. Many economists agree that the spread of COVID and the contagious delta variant remain the highest risk factor for Asian countries. Economists are also watching out for the impacts of U.S. inflation and changes in monetary policy. The U.S. Federal Reserve has signalled that it expects to make its first post-pandemic interest rate hike in 2023. Higher interest rates in the U.S. tend to cause capital outflows from Asian emerging markets and prompt local currencies to depreciate.
INDONESIA
Citi: Global decarbonisation may weaken Indonesia’s coal exports but boost base metals
(7 July 2021) Global decarbonisation will likely weaken Indonesia’s coal exports in the medium to long-term, but this could be mitigated by a pickup in exports of base metals, Citi economists said in a July 6 note. Indonesia is estimated to have the world’s largest share of nickel reserves at around 12% and has the world’s second-largest copper mine. The decarbonisation trend is expected to have a limited fiscal impact on Indonesia, as the bulk of the government’s natural resource revenues come not from coal, but oil and gas. Non-oil mining revenues averaged just 0.2% of the gross domestic product in the past five years, compared to 0.6% for direct oil and gas revenues.
MALAYSIA
Malaysia needs stronger future-proofing to attract EU and UK investments, says HSBC Malaysia CEO
(5 July 2021) Malaysia is primed to be a major beneficiary of European and UK investments, but greater adaption and adoption of trade, sustainability, technology and digital trends and reform are required to convert this potential into reality, HSBC Bank Malaysia chief executive officer Stuart Milne said. Milne said Malaysia has received significant foreign direct investments (FDIs) and is uniquely positioned to capture increasing opportunities arising from supply chains that are moving to the ASEAN region. But the region is not without its challenges, he added. “To offset these headwinds, greater policy reform to encourage greater trade flows, technological improvements to increase manufacturing productivity, and digital and sustainability adoption is needed,” he said.
THAILAND
AirAsia to take over Gojek’s business in Thailand
(7 July 2021) AirAsia is to acquire Indonesian unicorn Gojek’s business in Thailand as the low-cost Malaysia airline steps up its digital ambitions. Gojek and AirAsia announced an all-share deal on 7 July that will see the Indonesian tech group take a 4.76% stake in AirAsia’s own “super-app” business, in newly issued shares, in exchange for its Thai business. AirAsia’s super-app business has been valued at around US$1 billion, while Gojek’s Thai business has been valued at a total of US$50 million, AirAsia said in a stock exchange filing.
THE PHILIPPINES
The Philippines need to tighten dirty money rules: Inquirer
(5 July 2021) The Philippines is back in the so-called “grey list” of countries under increased international monitoring, because of insufficient policies and laws on, and action against, money laundering and terrorist financing. The Anti-Money Laundering Council (AMLC) said the country must address 18 action points to be removed from the list. The Philippines would have to submit progress reports to the Financial Action Task Force (FATF) thrice a year, the first to be given this September. The AMLC stressed that the relevant government and law enforcement agencies’ sustained pledge to implement the 18 action plans within the prescribed timelines would be essential to the country’s removal from the list. “The Philippines will be delisted from the ‘grey list’ upon successful completion of all action plans-hopefully on or before January 2023,” said Bangko Sentral ng Pilipinas governor Benjamin Diokno.
SINGAPORE
Crypto groups shelter in Singapore as global regulators crackdown
(8 July 2021) Global cryptocurrency groups are expanding their presence in Singapore, drawn by the city-state’s friendly regulatory environment as other markets crackdown on the industry. The city has yet to issue licences to cryptocurrency companies, but it has granted exemptions to some of the industry’s biggest players, allowing them to serve local retail and institutional investors. Binance has been granted a licence exemption along with OSL, a Hong Kong-based exchange. Vitalik Buterin, the founder of cryptocurrency Ether, is also based in Singapore. While growth in the crypto industry has been supercharged this year, regulators in markets including the U.S., U.K., and China have clamped down on the sector. Hong Kong, a rival Asian financial centre, is set to limit crypto trading to accredited or institutional investors under a new law.
VIETNAM
Vietnam to solve bottlenecks to develop its auto industry
(8 July 2021) Limited market capacity and price differences between domestically produced and imported cars are the two biggest bottlenecks for the local auto industry, according to the latest report from the Vietnam Ministry of Industry and Trade (MoIT). According to the ministry, the local auto market was one-third of the size of Thailand’s and one-quarter of Indonesia’s. It added that the local auto industry is scattered with many different assemblers and models. This has made it difficult for firms that manufacture, assemble, and produce components and spare parts to invest and develop in means of mass production. The cost of producing new cars in Vietnam is also 10% to 20% higher than in other countries in the region. To overcome these issues, the MoIT is coordinating with relevant ministries, branches, and agencies to create more opportunities in the local market for Vietnamese made auto products. This includes developing automobile infrastructure, such as roads and motorways, in big cities like Hanoi and HCM City.
RCEP Monitor
AUSTRALIA
Australia to halve overseas arrivals to 3,000 per week; hotel quarantines under strain
(2 July 2021) Australia will halve the number of arrivals from overseas as its coronavirus hotel quarantine system creaks under pressure from outbreaks of the highly transmissible delta variant, Prime Minister Scott Morrison said on 2 July. Morrison said Australia will now only accept about 3,000 travellers from overseas per week. The new restrictions on travel come as Australia fights outbreaks of the delta variant simultaneously in three state capital cities.
CHINA
China signals easier monetary policy, reviving worries about weaker growth
(8 July 2021) China’s top-level executive body said late Wednesday the central bank would stimulate the economy with cuts to the amount of funds banks need to hold in reserve. “We think this policy signal suggests the economy likely slowed in June,” Zhiwei Zhang, chief economist, Pinpoint Asset Management, said in a note. In the last two months, consumer spending, which China is trying to rely more on for growth, grew slower than expected and authorities have kept up their efforts to support smaller, privately owned businesses, which generate a significant share of jobs. China’s signal of easier monetary policy comes as the U.S. Federal Reserve considers plans to tighten policy and gradually move away from stimulus measures made in the wake of the coronavirus pandemic.
SOUTH KOREA
South Korea raises Seoul’s COVID-19 restrictions to the top level, new cases set second straight national record
(9 July 2021) South Korea will raise anti-coronavirus restrictions to the highest level in Seoul and some neighbouring regions for two weeks from 12 July, Prime Minister Kim Boo-kyum said on 9 July, after new COVID-19 cases climbed to a daily record for the second day running. The ‘Level 4’ restrictions are the toughest of all distancing measures. The country reported 1,316 new COVID-19 cases as of midnight of 8 July, up from the previous record of 1,275 a day on 7 July. Health officials warned the numbers may nearly double by the end of July. South Korea has only given both shots in the dual vaccination process to just over 10% of its 52 million population, while 30% have received at least one dose, the majority of whom are aged over 60. The country aims to reach herd immunity before November by inoculating 70% of the public with at least one shot by September.