CARI Captures Issue 511: Goldman Sachs slashes 2021 growth projections for major ASEAN economies due to new COVID-19 waves

Goldman Sachs slashes 2021 growth projections for major ASEAN economies due to new COVID-19 waves

(15 July 2021) Goldman Sachs has cut its 2021 growth projections for major ASEAN economies due to a rapid climb in COVID-19 infections across the region. Goldman Sachs slashed its growth forecasts for Indonesia, Malaysia and Philippines by more than 100 basis points, while Singapore and Thailand saw smaller cuts. The rapid climb in COVID-1 infections comes as vaccination rollouts in many ASEAN countries continue to stall, with the exception of Singapore. Goldman Sachs predicts that Malaysia will begin to ease restrictions in the fourth quarter in 2021, while other countries will do so only in the first half of 2022. Export-orientated economies such as Malaysia and Singapore will also benefit from a rebound in global growth, while Malaysia will also benefit from higher commodity prices.

Indonesian investors banking on economic rebound once COVID-19 infection numbers reaches inflection point

(15 July 2021) Indonesian investors are banking on Indonesian bonds, its currency and stocks rebounding once an inflection point in COVID-19 cases is reached. Comparisons have been made with India, where Indian assets were all beaten down earlier this year due to a spike in cases, but bounced back once cases in India had reached their peak. Currently in Indonesia, 10-year bond yields climbed 17 basis points in June 2021, while the Jakarta Composite Index presently has fallen almost 3% from a high in June. Macroeconomic conditions in Indonesia remain healthy, with the Indonesian Finance Minister stressing that the government will return Indonesia back to its fiscal rule of a 3% deficit-to-GDP cap by 2023, helping bolster bond-market sentiment. Meanwhile, the rupiah should be helped by a recent announcement by the country’s central bank that it was effectively done with easing cycles.

Malaysian government expected to downgrades growth forecast for 2021 to around 4%

(12 July 2021) Malaysia’s Finance Minister stated in an interview with Bloomberg TV that the government is expected to downgrade its GDP growth forecasts for 2021 to around 4%, due to the COVID-19-related restrictions. The government had already stated that it would revise the current outlook of 6%-7.5% growth starting in August 2021. Much of the country has been under lockdown measures since June 1, 2021, costing the economy 1 billion ringgit ($239 million) a day. The government will also propose raising the debt ceiling to 65% from 60% currently, and the country’s fiscal deficit is expected to widen to 6.5%-7% of GDP, up from the projected 6%.

Peso slides to lowest level in over a year after Fitch Ratings revises its outlook on the Philippines to negative

(13 July 2021) The Philippines peso declined by as much as 0.4% to 50.30 per dollar, its weakest since June 2020, after Fitch Ratings revised its outlook on the Philippines from stable to negative. The Philippines Stock Exchange likewise declined by 1.2%, while the spread on Philippines’ 2032 dollar bond over Treasuries rose about five basis points to 75.1 basis points. Fitch Ratings believed there are challenges associated with unwinding the significant policy responses to the health crisis, and ultimately restoring sound public finances following the end of the pandemic. The Philippines central bank doesn’t see GDP returning to pre-pandemic levels until the third quarter of 2022.

Three more Thai islands open to vaccinated foreign tourists on 15 July despite nationwide surge in cases

(15 July 2021) Thailand opened three more islands to foreign vaccinated tourists on 15 July despite a nationwide surge in cases. The islands included Samui, Tao and Phangan, and were opened as part of the country’s so-called ‘sandbox scheme’, which permitted foreign vaccinated tourists to visit Phuket Island starting on 1 July without having to quarantine. Under this new expansion, tourists must stay at an approved hotel on Samui for a week, and can only leave their accommodation on day four. Phuket has already received 5,000 tourists since its reopening, with only 10 tourists being tested positive for COVID-19. Tourism makes up some one-fifth of Thailand’s national income, and is currently being battered by the global pandemic.

Cambodia closes down all cross-border travel with Viet Nam for one month to curb COVID-19 cases

(15 July 2021) Cambodia has closed down all cross-border travel with Viet Nam for one month in order to help curb COVID-19 cases. The suspension of travel will take effect starting from 18 July, with exceptions made for diplomats, civil servants, some students and patients in need of medical treatment. The border closures come amidst reports of Vietnamese nations continuing to travel back and forth across the Cambodian-Vietnamese border despite both countries facing their largest outbreaks to date. Many Cambodian border towns with Viet Nam hosts casinos serving Vietnamese nationals unable to enter casinos in their own country. The country’s only integrated casino resort, NagaWorld in Phnom Penh, has been closed since March 2021 after 11 staff tested positive to COVID-19 in that month.

Singapore non-oil domestic exports rise by 15.9% in June 2021 at fastest pace since March 2020

(16 July 2021) Singapore’s non-oil domestic exports (NODX) rose by 15.9% in June 2021, its fastest pace since March 2020. The country’s NODX had grown by a revised 8.6% in May 2021. On a month-on-month seasonally adjusted basis, Singapore’s NODX increased by 6% in June, after a 0.2% decline in May. This growth in exports was fueled by global demand for semiconductor-related products and an increase in non-electronic shipments such as specialised machinery and petrochemicals. Exports to the majority of Singapore’s top markets rose, with the exception of the United States, Japan, and Malaysia. Singapore’s overall growth prospects will depend on the COVID-19 situation in the country, including from the recent discovery of new clusters.

RCEP Monitor

China’s GDP growth slowed down to 7.9% in the April-to-June quarter
(15 July 2021) According to statistics by the National Bureau of Statistics, China’s GDP growth slowed down to 7.9% in the April-to-June quarter, after plateauing at 18.3% in the previous three months. This signalled a halt to China’s V-shaped recovery following the COVID-19 pandemic. This swift deceleration was underlined by a 0.5% cut to banks’ reserve requirements effective 15 July. Only 26% of Chinese companies surveyed by IHS Markit in June 2021 predicted a rise in business activity over the next year, down slightly from 28% in February. China’s second-quarter growth was fueled by exports as its trading partners eased lockdowns and vaccination rollouts accelerated.

New Zealand and Singapore sign arrangement regarding cooperation on low-carbon hydrogen energy
(15 July 2021) On 15 July, New Zealand and Singapore signed an arrangement regarding cooperation on low-carbon hydrogen energy. The arrangement will foster closer bilateral cooperation including through facilitating opportunities to chart standards and certifications and scale up both countries’ respective hydrogen economies, establish supply chains for low-carbon hydrogen and its derivatives, conduct joint research, development and deployment studies, and strengthen networks and partnerships. The arrangement will allow both countries to share knowledge about hydrogen, including through its use and deployment through small demonstration projects up to large scale construction.

Victoria state enters snap lockdown after two more COVID-19 cases discovered
(15 July 2021) On 15 July, the state of Victoria began a snap lockdown after two more COVID-19 cases were discovered, bringing the total number of cases in the state to 18. This is the fifth lockdown Victoria state has undergone since the pandemic began in 2020, and will last until 20 July. These new outbreaks in Victoria follows an outbreak in neighboring New South Wales, which is currently under a five-week lockdown which will last until the end of July 2021. Under the new lockdown, residents will be forced to stay home except for food shopping, essential work, exercise and getting vaccinated. At this point, only 12% of Australia’s adult population is fully vaccinated.

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