CARI Captures Issue 584: Asian Development Bank downgrades 2023 growth projections for Southeast Asia to 4.7%
ASEAN
Asian Development Bank downgrades 2023 growth projections for Southeast Asia to 4.7%
(14 December 2022) In its latest report, the Asian Development Bank (ADB) downgraded its growth projections for 2023 for Southeast Asia to 4.7%, from a previous projection of 5.0% growth made in September 2022. However, the ADB also raised its 2022 growth forecast for Southeast Asia to 5.5% from a previous forecast of 5.1%. Viet Nam was predicted to be the fastest growing economy in Southeast Asia in both 2022 and 2023, at 7.5% and 6.3% respectively. The ADB trimmed its 2023 growth outlook for developing Asia to 4.6% from 4.9%. Developing Asia will also likely end 2022 with a 4.2% expansion, slightly lower than the 4.3% forecast in September. The ADB attributed the slowdown in growth across Asia in 2023 to recurrent lockdowns in China, the war in Ukraine, and slowing global growth. High inflation and rising interest rates are also expected to have a negative impact.
ASEAN, EUROPEAN UNION
ASEAN and EU resolve to cooperate more at first-ever EU-ASEAN Summit in Brussels
(15 December 2022) ASEAN and the EU resolved to cooperate more on everything from green energy to security at the first-ever EU-ASEAN Summit, which was held in Brussels on 14 December, 2022. The Summit commemorated the 45th anniversary of diplomatic ties between both countries, and came as both blocs see an increasing confluence of interests, including in charting their own strategic paths outside of the US-China rivalry. In a joint statement, the leaders of both blocs vowed to develop the EU-ASEAN Strategic Partnership, which is based on international law, mutual interest and mutually beneficial cooperation. The EU also announced the first tranche of investment projects with ASEAN under the Global Gateway investment strategy. The total package is worth EUR 10 billion. The Global Gateway seeks to provide investments in infrastructure worldwide, focusing on energy, transport, digitalization, education, trade and sustainable value chains.
INDONESIA
Indonesia posts larger-than-expected trade surplus of US$5.16 billion surplus in November 2022
(15 December 2022) Indonesia posted a larger-than-expected trade surplus of US$5.16 billion in November 2022. A poll carried out by Reuters had expected a trade surplus of US$4.26 billion. Indonesia’s imports had unexpectedly contracted by 1.89% on a yearly basis to US$18.96 billion. Exports were up by 5.58% on a yearly basis to US$24.12 billion, the slowest increase since October 2020. The value of exports for the January-November period, at US$268.18 billion, surpassed the country’s highest record for annual shipments, which was reached in 2021 at US$231 billion. While Indonesia’s exports have enjoyed a boom in 2022 due to high commodity prices, export growth has been slowing since June due to moderating prices of commodities such as palm oil, nickel, and iron ore.
SINGAPORE, CHINA
Boom in Chinese family offices setting up office in Singapore draws finance professionals
(12 December 2022) A boom in mainland Chinese family offices setting up in Singapore has been drawing thousands of financial professionals from other investment banks. Wealthy mainland Chinese account for up to half of a rise in Singapore-based single family offices. Total numbers have jumped nearly threefold since the COVID-19 pandemic began, and now total as many 1,500. Since April 2022, the Singapore government has required Singapore-based family offices to hire at least two investment professionals to qualify for tax exemptions, while larger funds must have at least three. These new rules have incentivized these family firms to employ thousands of finance professionals, including asset management, private wealth management and other banking professionals. The government also tightened other rules in 2022, with higher minimum capital and hiring requirements.
MALAYSIA
Property sector expects 2023 to be challenging due to current property glut
(15 December 2022) The Malaysian property sector expects 2023 to be challenging due to the current glut in the property market. The property market had been heavily impacted by the COVID-19 pandemic due to inflation, interest rates hikes, productivity lag, labour shortages as well as issues in the supply chain which either drove up costs or reduced productivity. Due to an oversupply of properties in certain sectors and locations, developers are trying to come up with innovative ways to do sales and promote their products. The property sector saw a significant recovery in 2022, driven by pent-up demand. Looking at the data of the property industry in 2022, volumes had increased by 70% with about 105,000 transactions, while value increased by 30% to MYR 47 billion worth of transactions.
THE PHILIPPINES
The Philippines’ central bank raises key interest rate to 5.5% to tame high inflation
(15 December 2022) On 15 December, 2022, the Philippines’ central bank raised its key interest rate by half a percentage point to 5.5%, its highest level since January 2009. The hike matched the US Federal Reserve’s latest monetary tightening on Wednesday. This latest move came after a 75-basis-point increase in November 2022. Inflation in the Philippines had accelerated to 8% in November, its fastest pace since 2008. This puts the 11-month average at 5.6%, well above the central bank’s 2% to 4% inflation target. So far, the central bank has raised its key rate by 3.5 percentage points in 2022, as it tries to ease the downward pressure on the Philippines’ peso from the US Federal Reserve’s rate increases. The peso had dropped to a record low of 59 against the US Dollar in October, before it stabilized at 55 in December.
CAMBODIA, CHINA
China-linked toll expressway opens for business after three years of construction work
(13 December 2022) Cambodia’s first toll expressway, which is a Chinese-linked project and connects Phnom Penh and Sihanoukville, has opened for business after three years of construction. The expressway cost around US$2 billion to construct, and stretches some 190 kilometers. The expressway cuts the time of the trip between the two cities from five hours to two. The expressway is operated by Chinese state-owned company China Road and Bridge Corporation (CRBC), who also constructed the road after China and Cambodia signed a deal for the road in 2018 under the build-operate-transfer model. Under the agreement, CRBC will collect tolls for five decades before transferring ownership to Cambodia. The expressway is expected to drive investments into the country.
RCEP Monitor
AUSTRALIA
Unemployment rate in Australia remains at 3.4% in November 2022, 64,000 jobs added
(15 December 2022) Australia’s unemployment rate remained at 3.4% in November 2022, with the economy adding some 64,000 jobs. The unemployment rate had been 3.4% in October as well. Joblessness has been at a near 50 year low for much of 2022, as a rebounding economy after COVID-19 related restrictions were eased combined with fewer overseas students and other short-term visa holders helped produce a tight labour market. During the September quarter, a record one in 30 jobs were vacant compared with about half that ratio before the pandemic. Australia’s workforce swelled to 13.77 million people in November, seasonally adjusted, reaching its latest record. Meanwhile, unemployment and underemployment levels are at about two-thirds of the level they were at in March 2020.
JAPAN
Japan moving closer to easing corporate tax rules for crypto holdings
(15 December 2022) Japan’s ruling party, the Liberal Democratic Party (LDP), agreed to ease corporate tax rules for crypto holdings. The LDP’s tax committee approved a proposal to exempt companies from paying levies for paper gains on crypto coins that they hold after issuing them. This will make it easier for companies to do business that involves issuing tokens. As of now, profits from cryptocurrency holdings, including unrealised gains, are subject to corporate tax of about 30% in Japan. The move indicates that policymakers in Japan are counting on cryptocurrencies to drive growth. The government will finalize its annual tax policy guidelines by end-2022.
JAPAN
Japan’s manufacturing activity contracts at fastest pace in 26 months in December 2022
(16 December 2022) Manufacturing activity in Japan contracted at its fastest pace in 26 months in December 2022 due to soft demand and persistent cost pressures. The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) was down to a seasonally adjusted 48.8 in December from a reading of 49.0 in November 2022. The index was below the 50-mark (which separates contraction from expansion) for a second month, and marked the sharpest decline since 48.7 in October 2020. Output and new orders extended their contraction for the sixth straight month in December. Meanwhile, activity in the services sector grew on a tourism reopening earlier in 2022. The services PMI rose to a seasonally adjusted 51.7 in December, from the previous month’s 50.3 final.