CARI Captures Issue 592: Economic recession seen as biggest challenge facing ASEAN in 2023
ASEAN
Close to 60% of Southeast Asians see unemployment and economic recession as biggest challenge for region in 2023
(09 February 2023) According to the ISEAS Yusof-Ishak Institute’s State of Southeast Asia: 2023 Survey Report, close to 60% of Southeast Asians saw unemployment and economic recession as the biggest challenge facing the bloc in 2023, followed by 57.1% who saw climate change as the top concern. Increased military tensions and widening socio-economic gaps and rising income disparity tied at third place at 41.9%. Meanwhile, 82.6% of respondents saw ASEAN as too slow and ineffective in coping with the rapidly changing geopolitics. 59.9% of respondents saw China as the most influential economic power in the region, while in terms of the most influential political and strategic power, 41.5% viewed China as the most influential, while another 31.9% chose the United States instead. When it came to seeking out third parties to hedge against the US-China strategic rivalry, 42.9% of respondents preferred the European Union, while another 26.6% chose Japan.
INDONESIA
Jakarta mandates higher blend of palm oil-based fuel in biodiesel, leaving less for exports
(08 February 2023) In February 2023, Indonesia mandated a higher blend of palm oil-based fuel in biodiesel, leaving less for exports. The mandate will increase the blend of palm oil-based fuel in biodiesel to 35% from 30%. The so-called B35 program is designed to cut greenhouse gas emissions and reduce the country’s dependence on imported crude oil. B35 is expected to increase the amount of palm oil used for fuel by 20% in 2023. It is believed that this will lead to Indonesia’s 2023 palm oil exports falling by about 20% from just over 30 million tonnes in 2022. In light of a directive by the European Union to phase out the import of palm oil linked to deforestation, Jakarta’s move is seen as an attempt to increase local demand to protect palm oil prices. Indonesia has taken steps toward boosting the biodiesel blending rate to 40%.
MALAYSIA
World Bank argues that price control mechanisms have caused supply shortages in Malaysia
(09 February 2023) During the launch of the World Bank’s Malaysia Economic Monitor (MEM) 2023, the World Bank noted that price control mechanisms and allocation of agricultural subsidies have distorted the efficiency of resources allocation, leading to supply shortages and higher prices for food staples. It was observed that Malaysia had the highest number of price controls within the region and that it had exacerbated the country’s cost of living. A survey carried out by the World Bank found that over half of the firms surveyed that were affected by these price controls had cut their production by a fourth. Commenting on agricultural subsidies, it was noted that the bulk of agricultural subsidies goes towards supporting the production of rice despite Malaysian consumers spending more on non-rice products.
MALAYSIA
Unemployment rate maintained at 3.6% in December 2022
(09 February 2023) The unemployment rate in Malaysia was maintained at 3.6% in December 2022, according to a research note by MIDF Research. The unemployment rate for youth aged 15 to 24 descended to a new pandemic low of 11.8% but remained higher than the pre-pandemic level of 10.4% in 2019. As well, the labor force and employment rose by 2.4% year-on-year and 3.1% year-on-year respectively, supported by robust domestic economic growth and an upbeat external front. Employment growth for 2022 hit a new record high at 3.5%, while the unemployment rate averaged 3.8%, higher than the average of 3.3% recorded in 2019. MIDF Research noted that labor shortages, global supply chain disruptions, and COVID-19 concerns will present downside factors with regard to the recovery of the Malaysian job market.
MALAYSIA, THAILAND
Malaysia and Thailand to sign four MoUs to explore cooperation in energy and digital economy
(08 February 2023) Malaysia and Thailand are to sign four memoranda of understanding (MoUs) to explore potential cooperation in the fields of energy and digital economy. The signing of the four MoUs will be witnessed by Malaysian Prime Minister Anwar Ibrahim and Thai Prime Minister Prayuth Chan o-cha in conjunction with the former’s visit to Thailand. The four MoUs are between Malaysia Digital Economy Corporation (MDEC) Sdn Bhd and Digital Economy Promotion Agency of Thailand; Tenaga Nasional Bhd (TNB) and Electricity Generating Authority of Thailand (EGAT); TNB Renewables Sdn Bhd and Planet Utility Co Ltd; as well as TNB Power Generating Sdn Bhd and B.Grimm Power Public Co Ltd. In 2022, Thailand was Malaysia’s seventh largest trading partner globally, with total trade increasing by 17.9% year-on-year.
VIET NAM, SINGAPORE
Viet Nam and Singapore sign Green-Digital Economic Partnership during Vietnamese Prime Minister’s visit to Singapore
(09 February 2023) On the start of a three-day visit by Vietnamese Prime Minister Pham Minh Chinh to Singapore on 09 February, 2023, both parties signed the Green-Digital Economic Partnership, which will see both countries collaborate on energy connectivity and infrastructure. This was one of several deals signed during the Vietnamese Prime Minister’s visit, including a separate plan to promote economic and trade cooperation by enhancing ties through projects including renewable energy and low-carbon solutions. Singapore represented Viet Nam’s largest source of foreign investment into the country in 2022, investing some US$6.46 billion. Singapore and Viet Nam have set the same goal of achieving net-zero emissions by 2050, although political instability currently taking place in Viet Nam may impact Hanoi’s energy plan going forward.
THE PHILIPPINES
Philippines stock rally loses steam due to investor worries over inflationary pressures and monetary tightening
(08 February 2023) After its best January performance in four years, the Philippines stock index has begun to lose steam due to investor worries over inflationary pressures and rising interest rates impacting profit growth and cap stock prices. The index, which had dropped by 8% in 2022, had recently benefited from China’s loosening of COVID-19-related restrictions in late 2022. The index had been up 20% in the past four months due to optimism over China’s reopening. However, concerns over sticky inflation have driven the stock market down in the past weeks. The consumer price index (CPI) in January 2023 was up 8.7% year-on-year, rising from the 8.1% annual inflation rate seen in December 2022. With inflation at a 14-year high, it is believed the Philippines’ central bank will raise rates again when it meets on 16 February, having raised rates by 350 basis points in 2022.
RCEP Monitor
JAPAN
Whole inflation stays elevated in January 2023 at 9.5% year-on-year
(10 February 2023) Wholesale inflation stayed elevated in January 2023 at 9.5% year-on-year, adding to signs of inflationary pressures that might force the Bank of Japan to phase out its currently loose monetary stance. The pace of increase slowed from the 10.5% recorded in January 2023. According to data by the Bank of Japan, the corporate goods price index (CGPI) stood at 119.8, matching a record high hit in December 2022. Data suggests that Japan’s core consumer inflation, which had hit a 41-year high of 4.0% in December 2023, will remain above the central bank’s 2% target over the coming months. The Bank of Japan expects inflation to slow gradually in the latter half of fiscal 2023.
SOUTH KOREA
South Korea’s finance ministry reaffirms view that inflation will ease around April-May 2023
(10 February 2023) South Korea’s finance ministry reaffirmed its view that inflation will ease around the April-May period of 2023, a week after data showed the country’s annual inflation had unexpectedly ticked up in January. South Korea’s consumer price index rose 5.2% year-on-year in January 2023, picking up speed from a 5.0% gain in December 2022. It was also above market expectations of 5% growth. The finance ministry also stated that the anticipated pick-up in China’s economic growth after its recent reopening would be positive for South Korea’s economy, although it stated that Seoul needs to continue diversifying its export markets.
AUSTRALIA
Australia raises rates to decade-high of 3.35% on 07 February 2023 reiterates that further increases will be needed
(07 February 2023) On 07 February 2023, the Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to a decade high of 3.35%, and reiterated that further increases would be needed moving forward. The RBA also forecasts that inflation will only return to the top of its target range of 2% to 3% by mid-2025. Inflation is expected to decline to 4.75% in 2022 and only slow to around 3% by mid-2025. The hawkish tone of the RBA surprised markets, which had predicted an imminent pause to its current course of monetary tightening. This was the ninth hike since last May 2022, with rates having been raised by a total of 325 basis points. The RBA also predicts that growth will average around 1.5% over 2023 and 2024.