ASEAN
Southeast Asian interest rates diverging after US Federal Reserve slashes rates
(16 October 2024) Interest rate paths in Southeast Asia are diverging after the U.S. Federal Reserve cut rates last month, with export-driven economies like Thailand and Malaysia expected to hold off on easing until 2025, while domestic demand-driven economies like Indonesia and the Philippines are moving towards further cuts. Indonesia, with a 5% GDP growth rate but weakening household consumption, has already cut its rate to 6% and may lower it again this year. Inflation has slowed to 1.84%, suggesting economic lethargy. Analysts predict the Philippines will also cut its key policy rate to 6% in response to easing inflation. Meanwhile, Malaysia and Thailand, both with current account surpluses and appreciating currencies, are under less pressure to reduce rates soon. Thailand’s central bank, focused on managing household debt, is resisting calls for a rate cut despite public pressure. The Malaysian central bank has held its rate at 3% and is expected to do so through 2025.

SINGAPORE
Singapore’s economy grew 4.1% year-on-year in Q3 2024, fastest pace in two years
(14  OCtober 2024) Singapore’s economy grew 4.1% year-on-year in Q3 2024, the fastest pace in two years, following 2.9% growth in the previous quarter. The manufacturing sector expanded by 7.5%, driven by growth across most clusters except for biomedical manufacturing, while the services and construction sectors grew by 3.3% and 3.1%, respectively. On a quarterly basis, seasonally adjusted GDP rose 2.1%, compared to 0.4% in the prior quarter. Non-oil domestic exports increased 15.7% in July and 10.7% in August. The Monetary Authority of Singapore (MAS) maintained its monetary policy stance, expecting GDP growth to reach the upper end of the 2% to 3% forecast range for 2024. Core inflation rose to 2.7% in August, though MAS expects inflation momentum to remain contained, forecasting core inflation to average between 2.5% and 3% for the year, down from a prior range of 2.5% to 3.5%.

INDONESIA
Sri Mulyani Indrawati asked by president-elect Prabowo to continue as finance minister
(15 October 2024) Sri Mulyani Indrawati has been asked by president-elect Prabowo Subianto to continue as Indonesia’s finance minister following a meeting on Monday night, potentially easing concerns about fiscal discipline under the new government. Indrawati, a respected technocrat, has not confirmed whether she will accept the role. Her previously expected departure had raised investor concerns over Prabowo’s ambitious spending plans, including a free meal program costing IDR 71 trillion in 2025. Following the news, the Jakarta Composite Index rose by 0.5% on Monday and another 0.25% on Tuesday morning. Prabowo, set to announce his cabinet on Sunday after his inauguration, plans to appoint 44 to 46 ministers, significantly more than the outgoing president’s 34. Indrawati confirmed that the Finance Ministry will remain a single entity, despite earlier plans in Prabowo’s manifesto to create an independent State Revenue Agency by combining the Directorate-General of Taxation and the Directorate-General of Customs and Excise. Other key figures likely to join the cabinet include Energy Minister Bahlil Lahadalia, Trade Minister Zulkifli Hasan, and State Enterprise Minister Erick Thohir.

MALAYSIA
Bursa Malaysia’s benchmark index rises by 17% over past year
(15 October 2024) Malaysia’s stock market has seen a steady revival, with the Bursa Malaysia’s benchmark index rising by up to 17% over the past year, driven by strong post-pandemic economic growth and significant foreign investments, particularly from US tech giants such as Nvidia, Google, and Microsoft. Investors opened 289,000 new trading accounts in the first seven months of 2024, nearly double the number in 2023. The country recorded MYR 83.7 billion (USD 19.3 billion) in approved investments in the first quarter, over half from foreign sources, and second-quarter GDP growth reached 5.9%. Malaysia’s stock exchange registered 34 initial public offerings in the first nine months of 2024, including 99 Speed Mart’s listing, which raised MYR 2.36 billion. Foreign investors bought a net total of MYR 1.50 billion in Malaysian stocks in the week ending 30 August. Malaysia’s IPO market led Southeast Asia during the first half of 2024, raising around USD 450 million. The Bursa’s market capitalisation hit MYR 2 trillion (USD 460 million) in May. Analysts see further potential for growth due to continued FDI momentum, Fed rate cuts, and infrastructure projects, though some caution is advised regarding foreign investor activity.

THE PHILIPPINES
Rice production falls 11.9% in third quarter of 2024, with output at 3.35 million metric tons
(17 October 2024) The Philippine Statistics Authority (PSA) reported an 11.9% drop in palay (unhusked rice) production for the third quarter of 2024, with output at 3.35 million metric tons (MT), down from 3.8 million MT in the same period last year. This figure also fell 1.2% below the PSA’s July forecast of 3.39 million MT. The total harvest area for palay decreased by 14.1% to 796,277 hectares, although yield per hectare increased by 2.4% to 4.20 MT. Meanwhile, corn production increased by 2.4% to 2.526 million MT, despite a 2% reduction in harvest area to 806,362 hectares. Challenges in the agricultural sector were exacerbated by the El Niño phenomenon, resulting in reduced rainfall and typhoons. The Department of Agriculture (DA) highlighted 2024 as a “litmus test” for the sector, facing high fuel costs, droughts, and floods. Supertyphoon Julian alone caused PHP 607.38 million in losses to the farm sector. The DA estimates annual palay losses of 500,000 to 600,000 MT due to natural calamities.

HONG KONG, CAMBODIA, LAO PDR, MYANMAR
Hong Kong relaxes visa criteria for Cambodian, Laotian, and Myanmar nationals
(17 October 2024) The Chief Executive of the Hong Kong Special Administrative Region (HKSAR) announced on 16 October that the HKSAR government has relaxed visa criteria for nationals of Cambodia, Lao PDR, and Myanmar, extending the validity of multiple-entry visas from two to three years. This policy has already applied to Vietnamese nationals since last year. The measures aim to strengthen ties with ASEAN countries. Additionally, the government will fast-track visa processing for group visitors from ASEAN countries via local travel agents and provide self-service immigration clearance for business and development participants from ASEAN. Effective immediately, the requirement for arrival or departure cards is canceled to streamline immigration. The government also plans to promote tourism from ASEAN and the Middle East, with initiatives including Arabic information at the airport and a list of halal restaurants.

VIET NAM
Viet Nam estimates cost of new railway to China at USD 7.2 billion
(17 October 2024) Viet Nam has estimated the cost of constructing a 427-kilometre railway connecting it with China’s Yunnan province at VND 179 trillion (USD 7.2 billion). The railway will run from Lao Cai province through Hanoi and Haiphong to Ha Long City. The plan, submitted by the Vietnam Railway Authority to the Transport Ministry, is expected to be reviewed and approved, with construction slated to begin in 2030. The railway is projected to handle 8.3 million passengers and 17.5 million tonnes of cargo annually by 2050. Vietnam is seeking Chinese technology and funding for this project, as part of its broader efforts to upgrade its aging railway infrastructure. Additionally, the National Assembly is expected to approve a USD 67 billion plan for a 1,541-km high-speed railway from Hanoi to Ho Chi Minh City, Vietnam’s largest infrastructure project to date. 

RCEP Monitor

JAPAN
Exports decline by 1.7% year-on-year in September 2024
(17 October 2024) Japan’s exports declined by 1.7% year-on-year in September 2024, marking the first drop in 10 months, according to Ministry of Finance data. This decline was worse than the forecasted 0.5% increase and followed a 5.5% rise in August. Exports to China, Japan’s largest trading partner, fell by 7.3%, while those to the U.S. decreased by 2.4%. Imports grew by 2.1%, below the expected 3.2% increase. As a result, Japan recorded a trade deficit of JPY 294.3 billion (USD 1.97 billion), larger than the forecasted JPY 237.6 billion deficit. The Bank of Japan (BOJ) Governor has pointed to external risks, such as U.S. economic uncertainties, in his cautious stance on timing the next interest rate hike. While the BOJ is expected to hold rates steady at its upcoming meeting, its forecast projects inflation to remain around the 2% target through March 2027. Despite these challenges, a central bank survey indicated that Japan’s business sentiment remains stable, though global economic uncertainties and geopolitical tensions may affect future performance.

AUSTRALIA, CHINA
Australia maintains open trade with China in electric vehicles and renewable energy products
(17 October 20240 Australia has maintained open trade with China, particularly in electric vehicles (EVs) and renewable energy products, despite tariffs imposed by the U.S., Canada, and the EU. Australian Prime Minister Anthony Albanese and Chinese Premier Li Qiang have emphasised the importance of institutional dialogue, including cooperation on climate change and renewable energy. In 2023, Chinese direct investment in Australia fell to USD 613 million, but bilateral ties have since improved, with a notable increase in Chinese investments in Australian renewable energy projects, such as the development of a 500MW solar farm in Queensland. Challenges remain, including lengthy foreign investment review processes and underdeveloped Australian energy infrastructure. Nonetheless, collaboration efforts, including the upcoming Smart Energy Conference and Exhibition starting in 2025, are expected to strengthen ties. Analysts suggest that balancing climate goals with geopolitical concerns will require a mature, independent Australian approach, leveraging China’s dominance in clean technology and Australia’s critical raw materials.

AUSTRALIA
Labour market adds 64,100 jobs in September, exceeding economists’ expectations
(17 October 2024) Australia’s labour market added 64,100 jobs in September 2024, significantly exceeding economists’ expectations of 25,000 jobs. Of these, 51,600 were full-time roles, bringing the total number of jobs created since the Albanese government took office to over 1 million. The unemployment rate was 4.1%, slightly lower than the initial 4.2% reported for August (the ABS has now revised August’s rate down to 4.1%). The labour force participation rate reached a record 67.2%, while hours worked rose to 1.97 billion. Although job ads and vacancies are shrinking, signalling potential employment challenges, the Reserve Bank of Australia (RBA) is expected to maintain its interest rate stance, with rate cuts unlikely until later in 2025. The Australian dollar rose to 67 US cents following the jobs data release, reflecting reduced investor expectations for early rate cuts.