CARI Captures Issue 591: IMF economic growth projections for ASEAN-5 economies year-on-year (%)

ASEAN-5 economies expected to grow by 4.3% and 4.7% in 2023 and 2024 respectively 
(30 January 2023) According to the IMF’s World Economic Outlook Update released on 30 January 2023, the ASEAN-5 economies are expected to grow by 4.3% and 4.7% in 2023 and 2024 respectively. In comparison, ‘emerging market and developing economies’ are expected to grow by 4.0% and 4.2% in 2023 and 2024. The ASEAN-5 as defined by the IMF comprises of Indonesia, Malaysia, the Philippines, Singapore, and Thailand. The IMF also estimated that the ASEAN-5 had grown by 3.8% and 5.2% in 2021 and 2022 respectively. The IMF projects that the global economy is projected to fall from an estimated 3.4% in 2022 to 2.9%  in 2023, then rise to 3.1% in 2024. The IMF noted that risks to the global economy have moderated since October 2022, with upsides including a stronger boost from pent-up demand in numerous economies and a faster fall in inflation. The downsides include a severe health outcome in China, Russia’s ongoing war in Ukraine, and tighter global monetary tightening.

Local Indonesian companies hope to cash in on Indonesia’s rich nickel deposits to enter EV and battery sectors 
(03 February 2023) Local Indonesian companies are hoping to cash in on Indonesia’s rich nickel deposit to enter the electric vehicle (EV) and EV battery sectors. With nickel comprising a key component in EV batteries, Indonesia hopes to leverage upon its rich deposits to develop a battery industry, enter the global EV supply chain and develop a manufacturing base. This comes as global EV makers, including China’s BYD and Tesla of the U.S. have either signed or are “finalizing” deals to invest in Indonesia. The government has sought to foster the local EV industry through subsidies and is also targeting increasing electric car sales to 20% of total car sales in Indonesia in 2025. Consultancy Mckinsey predicted that Indonesia’s revenue from the entire EV supply chain is projected to reach nearly US$50 billion by 2035. Among the Indonesian conglomerates hoping to enter EVs include major coal miners Indika Energy, Adaro Energy and TBS Energi Utama. As well, Bakrie & Brothers, a conglomerate with interests spanning energy, infrastructure, and telecommunications, is also hoping to enter the EV industry.

Marcos Jr. administration reportedly mulling issuing Eurobonds to supplement budgetary needs 
(03 February 2023) The Marcos Jr. administration is reportedly mulling issuing Eurobonds to help supplement its budgetary needs. According to the Philippines’ Finance Secretary, the plan is still in the works. Should the plan go through, the Eurobonds would be sold to retail investors. The Marcos Jr. administration has tapped international debt markets twice for its spending needs since taking office. The first time was in October 2022, when it borrowed US$2 billion from dollar-denominated bonds sold in three tranches, with debt papers payable in five, 10.5, and 25 years. The second came at the start of 2023, when the government borrowed US$3 billion through the sale of green bonds sold under the state’s sustainable finance framework. The Philippines’ debt stock mainly comprises domestic liabilities at 70% of total debt. The Marcos Jr. administration is currently operating with a budget deficit due to inheriting a significant amount of debt from the previous administration.

World Bank says Malaysia’s current strategy of fiscal consolidation through spending cuts is ‘challenging’ 
(03 February 2023) The World Bank called for Malaysia to explore new sources of revenue to improve its fiscal position, noting that its current strategy of fiscal consolidation through spending cuts is ‘challenging’. The World Bank said that the Malaysian government needs to raise taxes due to declining revenue and should consider re-introducing the goods and services tax, or revising the personal income or sales and services taxes. Government revenue in Malaysia remains low and trails comparative peers. Government revenue is expected to resume declining in 2023 on moderating crude oil prices. Malaysia currently operates Southeast Asia’s widest fiscal deficit after the Philippines, having seen its budget strained by the cost of keeping essentials at below-market prices. The World Bank noted that relying on spending cuts would be difficult as structural expenditure was already elevated, while operating expenditures on supplies and services have been declining or are already at low levels.

Retail sales in Singapore rose by 7.4% in December 2022, exceeding market consensus 
(03 February 2023) Retail sales in Singapore continued to rise by 7.4% in December 2022, exceeding the market consensus of a 5.8% expansion. Meanwhile, sales were up 1.3% on a month-on-month basis. The recent trend of falling supermarket sales coupled with strong spending at department stores and recreational goods extended into December 2022. Supermarket and hypermarket sales fell 2.2% year-on-year, while department store sales and spending on recreational goods were up 11% and 7.8%, respectively. Retail sales continued to sustain gains in the face of elevated prices, the latter of which was bolstered by the return of foreign tourists. Analysis by ING projected that retail sales would moderate in early 2023 as prices remain high and economic activity is affected by the projected global economic slowdown. The implementation of the goods and services tax at the start of 2023 should add more downward pressure on sales.

Land prices in Bangkok sees average increase of 70% to 75% between 2020 and 2022 
(03 February 2023) Land prices in Bangkok saw an average increase of 70% to 75% between 2020 and 2022 due to infrastructure development along with urbanisation driven by mass transit expansion. The Real Estate Information Center (REIC) recently reported the price index of vacant land in Greater Bangkok in the fourth quarter in 2022 at 381.4 points, an increase of 12.5% compared to the same period in 2021, and a rise of 3.4% from the third quarter of 2022. Despise this, the rise of prices of vacant land remained lower than the five-year pre-pandemic average of 14.8% year-on-year and 4.1% quarter-on-quarter between 2015 and 2019. The lower growth was attributed to the global economic slowdown due to the COVID-19 pandemic and the Russian invasion of Ukraine.

Government seeking ways to boost Viet Nam’s exports through trade facilitation 
(03 February 2023) The Vietnamese government is considering trade facilitation measures to boost production and exports as the country attempts to avoid the global recession. Viet Nam’s Prime Minister Pham Minh Chinh noted that with external factors having led to lowering demand and decreasing production, it is important to diversify exports and supply chains while developing a resilient and self-independent economy. In order to diversify export markets, Viet Nam is considering trade facilitation, technical barriers reduction, and improving the quality of its products. It is noted that with northern Europe and Latin America representing a smaller share of Viet Nam’s exports, there is much room for growth. According to S&P Global Market Intelligence, the Vietnamese manufacturing sector faced challenging business conditions in January 2023, with declining production and new orders.

RCEP Monitor

Japanese power utilities companies stepping up efforts to cut coal import costs 
(02 February 2023) Japanese power utilities companies are stepping up efforts to cut thermal coal import costs by switching to lower quality coal and widening import sources. Japan is switching to burning cheaper low-to-mid-grade coal, and is also seeking new suppliers in Africa and South America. Global coal prices rose to record levels in 2022 due to disruptions in Russian energy exports. Seven major regional utilities have already applied to raise electricity prices from April or June 2023 as the industry is affected by the elevated costs of imported fuels, exacerbated by the weak yen. According to Japan’s Minister of Finance, JERA, Japan’s biggest power generator, has modified equipment at its coal power plants so that it can burn a wider variety of coal, which has already helped bring down the fuel cost by about US$202 million in the nine months ending on 31 December, 2022.

Flooding in Auckland adds to inflationary pressures and cost of living crisis in New Zealand 

(03 February 2023) Flooding in the city of Auckland is adding more inflation pressures and contributing to the rising cost of living in New Zealand. With annual inflation already near a three-decade high of 7.2%, cost-of-living pressures is expected to be a hot-button issue going into elections on 14 October, 2023. Observers note that it will take several months for Auckland to recover from the significant damage to thousands of houses, roads and vegetable crops. Food prices are already at a three-decade high of 11.3% year-on-year in December 2022, and the flooding in Auckland and much of the upper North Island will further add to the overall costs for a range of consumer items from cars to couches and onions.

Inflation accelerates to 5.2% year-on-year in January 2023, keeping open possibility of further rate hikes 

(02 February 2023) Inflation accelerated to 5.2% year-on-year in January 2023, keeping open the possibility of further rate hikes even as the Korean economy weakens. Consumer prices had risen from the 5% year-on-year growth recorded in December 2022. Core inflation, which excludes agricultural and oil-related products, came in at 5% in January 2023, picking up from 4.8% the previous month and suggesting that underlying pressures remains strong. The Bank of Korea (BOK) stated that inflation would likely remain at 5% in February 2023 before showing signs of further cooling, adding that upward pressure on international commodity prices could increase if China’s economic reopening fuels further demand. The BOK stated it would stay on a path of policy tightening as long as inflation remains within the 5% range. The BOK’s rate currently stands at 3.5%, compared with 0.5% in August 2021 when the current tightening cycle began.

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