CARI Captures Issue 587: Indonesia’s 2023 ASEAN Chairmanship begins under theme of ‘ASEAN Matters: Epicentrum of Growth’

Indonesia’s 2023 ASEAN Chairmanship begins under theme of ‘ASEAN Matters: Epicentrum of Growth’
(04 January 2023) Indonesia’s 2023 Chairmanship began on 01 January, 2023 under the theme of ASEAN Matters: Epicentrum of Growth’. This followed Indonesia’s presidency of the G-20 in 2022, during which it led the world’s top 20 economies in a year marked by the Russo-Ukraine War and the resulting food and energy crisis. Economic growth will be a huge part of Indonesia’s ASEAN chairmanship, with Indonesian President Joko Widodo having called for robust, inclusive, and sustainable economic growth within ASEAN. Indonesia also intends to navigate ASEAN through the ongoing Sino-China rivalry, with the aim of preventing the bloc from becoming a proxy to either superpower. Indonesia will also have to resolve the ongoing Myanmar Crisis, with Myanmar currently having made zero progress on ASEAN’s five-point consensus. Jakarta also intends to continue supporting the accession of Timor-Leste to ASEAN.

Indonesia raises US$3 billion in US dollar bond issuance, its first for the year
(05 January 2023) Indonesia raised US$3 billion in a US dollar bond issuance, its first for the year in a transaction that drew in a total of US$14.4 billion worth of orders. The Indonesian government issued the bonds in five, 10 and 30 year tranches. These raised US$1 billion, US$1.25 billion and US$750 million respectively. The final orders were US$3.6 billion for the five-year bond, US$4.7 billion for the 10 year and US$6.15 billion for the 30 year tranche. Final yields were set at 4.8% for the five year, 5.1% for the 10 year and 5.75% for the 30 year bond. Proceeds from the bond issuance will be used to finance the state budget. The Indonesian government usually offers foreign investors bonds denominated in US Dollar, Euros, and Japanese Yen throughout the year.

President Ferdinand Marcos Jr. secures US$22.8 billion worth of investment pledges from China
(05 January 2023) The Philippines President Ferdinand Marcos Jr. secured some US$22.8 billion worth of investment pledges during a state visit to China. Marcos Jr. had met with Chinese President Xi Jinping on 04 January, 2023 as part of a three day visit. The commitments Marcos Jr. secured from Chinese investors included US$13.76 billion for renewable energy, US$7.32 billion for electric vehicles and mineral processing, and US$1.72 billion for agriculture. Among the 14 agreements signed in total, some were regards to loans and infrastructure under China’s Belt and Road Initiative, as well as agriculture exports to China. Both parties also agreed to narrow the trade gap which currently favors China, as well as find compromises with regards to the ongoing South China Sea dispute.

The Philippines’ central bank ready to take ‘all policy action necessary’ in response to

(05 January 2023) The Philippines’ central bank stated they were ready to take ‘all policy action necessary’ in response to upward pressure on consumer prices. The consumer price index rose 8.1% year-on-year in December 2022, driven mainly by higher food and energy prices. This brought the full-year average to 5.8%, a 14 year high and above the official 2% – 4% target band. The central bank noted that upside risks will continue to dominate the inflation outlook up to 2023, while remaining broadly balanced in 2024. The central bank also set the same 2% – 4% inflation target for 2023. Core inflation, which excludes volatile food and energy components, rose to 6.9% in December 2022 from 6.5% in November. Meanwhile, food inflation increased to 10.6% in December from November’s 10.3%, reflecting spikes in prices of vegetables, sugar, rice and other agricultural commodities due to climatic conditions and holiday demand.

Malaysia’s economy expected to grow by 4% in 2023 amidst lingering environment of high inflation
(05 January 2022) According to Maybank Investment Bank (Maybank IB), Malaysia’s economy is expected to grow by 4% in 2023 amidst an environment of high inflation and rising interest rates globally. This is compared to the estimated 8% growth in 2022. Although consumer spending is expected to slow down to 6% in 2023, consumers are expected to tap into their excess savings built up during the COVID-19 pandemic to sustain consumer spending growth. Inbound tourism is expected to sustain a resurgence in 2023, while robust approved investment growth is likely to continue amid supply chain relocation and rising capital expenditure for data centres, 5G infrastructures as well as automation. In terms of monetary policy, Maybank IB predicted that Bank Negara Malaysia (BNM) will raise its overnight policy rate (OPR) by another 25 basis points to 3% before pausing for the rest of 2023.

Singapore’s economy grows more than expected at 3.8% year-on-year in 2022
(03 January 2023) Singapore’s economy grew more than expected at 3.8% year-on-year in 2022. 2022’s growth beat the 3.5% expected by the government, but was half the 7.6% growth seen in 2021. However, this was weighted by a 3.0% contraction in the key manufacturing sector in the final three months. Growth in the fourth quarter came in at 2.2%, sharply down from 4.2% in the third quarter. Exports for computer chips and other products have been hit by softer global demand caused by surging inflation and interest rate hikes. Moving forward, domestic demand is expected to be hit by elevated interest rates, declining household savings and high inflation. Prime Minister Lee Hsien Loong warned in his New Year’s message that growth in 2023 is expected to ease to 0.5 – 2.5%.

Trade between Cambodia and the United States reach US$8.51 billion in the first 11 months of 2022
(01 January 2023) Total trade between Cambodia and the United States reached US$8.51 billion in the first 11 months of 2022, marking gains of 21.79% on-year, with Cambodian exports to the United States accounting for a 96.56% share. Cambodia’s trade surplus with the United States for the same period expanded by 24.35%, from US$6.37 billion to US$7.93 billion. The United States remained Cambodia’s largest export market, comprising a 40.17% market share of the total US$20.458 billion. In December 2022, the two-way merchandise trade came to US$620.18 million, down 2.28% from November 2021 but up 4.63% from October 2022.

RCEP Monitor

Services activity shrinks in December 2022 due to surging COVID-19 infections
(05 January 2023) China’s services activities shrank in December 2022 due to surging COVID-19 infections impacting consumer demand, according to the Caixin/S&P Global services purchasing managers’ index (PMI). The index had risen to 48.0 in December from 46.7 in November, but remained below the 50-point mark, indicating contraction in activity, for a fourth straight month. Companies in the survey also reported falls in output and new work for the fourth straight month in December, while external demand fell into contraction from growth in November. However, the confidence index rose to a 17 month high, indicating that the surveyed firms were bullish about recovery prospects over the next 12 months due to the lifting of COVID- 19 restrictions.

South Korea to roll out large tax breaks for domestic investments into chips manufacturing
(03 January 2023) South Korea will roll out large tax breaks for semiconductor firms and other technology companies that invest domestically in order to ensure the security of supply chains. Firms that invest in South Korea will be able to avail of a 35% tax deduction, helping companies save more than US$2.85 billion in tax payments for 2024. South Korea is currently the world’s biggest producer of memory chips, with local firms Samsung and SK Hynix together controlling about 70% of the global market. South Korea’s proposed tax breaks come as other major economies around the world, including Taiwan and the United States, roll out their own measures to boost their domestic chip industries.

Average housing prices fall 5% in December 2022 in biggest drop since 2008
(04 January 2023) Average housing prices in New Zealand fell 5% year-on-year in December 2023, in the largest drop for a calendar year since 2008. More declines are expected moving forward with New Zealand’s central bank continuing to fight inflation with a series of aggressive interest-rate hikes. While the pace of home price declines have slowed on a monthly basis, this most probably reflected optimism earlier in the fourth quarter of 2022 that interest rate hikes were nearing a peak. However, sentiments have changed following an unexpectedly high inflation report, suggesting inflation will remain stubborn in 2023. New Zealand’s central bank lifted the OCR by a record 75 basis points to 4.25% in late November 2022, and projected the benchmark will need to reach 5.5% in 2023 to return inflation to its 1-3% target.

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