CARI Captures Issue 618: Indonesia’s GDP growth from Q1 2020 to Q2 2023, year-on-year (%)

Indonesia’s economy expands by 5.17% year-on-year in the second quarter of 2023
(07 August 2023) Indonesia’s economy expanded by 5.17% year-on-year in the second quarter of 2023, accelerating from a revised 5.04% expansion in the first quarter. These latest growth figures were the highest in three quarters. Private consumption, which makes up over half of Indonesia’s GDP, rose 5.23% year-on-year in the same quarter, while investments increased 4.63%. Private consumption was buoyed during the Islamic holy month of Ramadan held from late March to late April. Ramadan generally brings the year’s biggest monthly consumer spending, thanks to holiday bonuses that companies are obliged to pay their employees. Consumer spending is expected to grow steadily ahead of elections to be held in February 2024.

Singaporean bank UOB cuts off counterparts in Myanmar in blow to military junta
(09 August 2023) Singaporean bank United Overseas Bank (UOB) is reportedly cutting off counterparts in Myanmar in what is expected to be a major blow to the country’s ruling military junta. In a confidential note sent to Myanmar banks last week, UOB stated it would restrict all incoming and outgoing payments to and from Myanmar accounts, only allowing funds to be moved between accounts held with the bank. It was also announced that tough new curbs on Visa card and Mastercard transactions for Myanmar individuals and banks would be implemented, which would restrict their dealings only to accounts within UOB. The new UOB framework is to take effect on 01 September, 2023, applying to transactions in all main currencies, including the U.S. Dollar, Euro and Singapore Dollar.

Singapore downgrades growth forecast for 2023 to 0.5% to 1.5%
(11 August 2023) Singapore downgraded its growth forecast for 2023 to 0.5% to 1.5% down from the 0.5% to 2.5% range earlier forecasted. This was attributed to a weak global economy and sluggish demand from key trading partners like China. GDP growth for the second quarter of 2023 stood at 0.5% year-on-year, compared with a preliminary 0.7% expansion announced in July and 0.4% growth in the first quarter. On a quarter-on-quarter seasonally adjusted basis, the country’s GDP expanded 0.1% in the second quarter, reversing a 0.4% contraction from the previous three months. These latest data demonstrate weaknesses in Singapore’s manufacturing sector outweighing the more resilient services sector. The manufacturing sector, which fell 7.3% year-on-year in the second quarter, accounts for a fifth of Singapore’s overall economy.

Thai equities rebound as domestic investors see months-long political standoff being resolved soon
(07 August 2023) Thai equities have seen a rebound as domestic investors see a potential end to the months-long political standoff that has paralyzed the country. The benchmark stock index has rallied more than 4% from a 28 June trough. While the SET gauge is still Asia’s worst-performing equity market in 2023, the recent performance outpaced a 1.6% gain in the broader regional gauge. Global funds have sold US$3.7 billion of the country’s equities thus far this year. Foreign investors are expected to stay away from Thai equities until there is more clarity about the new government to be formed. Since the general election held in May 2023, local investors have increased net equity purchases by US$1.64 billion, while foreign funds pulled a net US$1.67 billion from local stocks in the same period.

Philippines’ economy slows down to 4.3% growth year-on-year in the second quarter of 2023
(10 August 2023) The Philippines’ economy slowed down to 4.3% growth year-on-year in the second quarter of 2023, a significant drop from the 6.4% growth recorded in the first quarter. Besides the pandemic years of 2020 and 2021, the annual expansion in the second quarter was the slowest since 2011. The economy fell 0.9% quarter-on-quarter, against a median estimate of a 0.6% gain. The drop in growth was attributed to high commodity prices, the lagged effects of rising interest rates, contraction in government spending, and a slowing global economy. Growth in the first half of this year stood at 5.3%, while policymakers target a 6% to 7% full-year expansion.

Government confident of hitting 16 million domestic tourists target for 2023
(09 August 2023) Authorities are confident of hitting its goal of 16 million domestic tourists in 2023. According to figures released by the Ministry of Tourism, as of the end of July, 2023, there were more than 12 million domestic tourists recorded in the first seven months of 2023. The ministry also predicted that Cambodia will greet five million international guests by the end of this year. By 2026, authorities believe that the number of international visitors will increase to about seven million. The months of July and August usually see less internal tourist movement due to the rainy season, with the numbers expected to rebound in September with the celebration of the traditional Buddhist festivals of Kan Ben and Pchum Ben.

World Bank forecast Viet Nam’s GDP growth to slow to 4.7% in 2023
(10 August 2023) The World Bank has forecast that Viet Nam’s GDP growth would slow to 4.7% in 2023 from 8% in 2022, citing a challenging external environment and weak domestic demand. The global financial institution also predicted that growth would accelerate to 5.5% in 2024 and 6.0% in 2025. This comes as US President Joe Biden recently stated he would travel to Viet Nam as part of efforts to improve relations with Hanoi. Both parties have increasingly close trade links, and also share concerns vis-a-vis China’s geopolitical ambitions, the latter of which includes its sweeping claims over the South China Sea.

RCEP Monitor

China slips into deflation as CPI contracts by 0.3% in July 2023
(09 August 2023) The Chinese economy slipped into deflation as the Consumer Price Index (CPI) contracted by 0.3% in July 2023, after having remained flat in June. This further signals a slowdown in China’s post-pandemic rebound amidst weakening domestic and overseas demand. Exports dropped by 14.5% in July, the third straight decline. Authorities have announced a raft of policy measures to prop up the economy, including greater support for private enterprise, with more policies expected to be implemented in the coming weeks. China last experienced deflation in late 2020 and early 2021 when pork prices collapsed across the country.

Yen falls to lowest point in nearly a month despite less dovish stance by BOJ
(07 August 2023) By the time Japanese markets had closed on 04 August, 2023, the yen incurred the steepest drop among the G7 currencies, having fallen by 1.2%. This is despite the Bank of Japan (BOJ) having seemingly adopted a less dovish stance. On 28 July, the BOJ adopted a more flexible approach to its yield curve control policy, under which it has virtually capped the yields on 10-year Japanese government bonds at 0.5%. The central bank signaled it would eventually allow the rates to move as high as 1%, while keeping the 0.5% cap as a ‘reference’. The continued fall in the yen was largely due to external factors, specifically gains in the rates of longer-term US Treasury bills, adding to the appeal of the US Dollar.

Australian business conditions showed ongoing resilience to raising rates
(08 August 2023) Australian business conditions demonstrated ongoing resilience to higher interest rates, defying expectations of a sharp economic slowdown despite consumer sentiment remaining deeply pessimistic. Business conditions measure sales, employment, and profitability. According to a survey by National Australia Bank Ltd., business conditions eased to 10 points in July while holding above the average since the start of 2023. Confidence advanced to 2 points, implying optimists outnumber pessimists. Meanwhile, consumer sentiment dropped 0.4% to 81 points, meaning pessimists heavily outnumber optimists, with a reading of 100 the dividing line. This divergence between household and consumer sentiment suggests businesses are currently better able to cope with surging interest rates.

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