The ASEAN+3 Macroeconomic Research Office (AMRO), a Singapore-based international organization analyzing the regional economy, last month downgraded this year's growth projections for ASEAN by 0.4 percentage point to 4.5%.
Chief Economist Khor Hoe Ee said in a recent interview with Nikkei Asia that Southeast Asia faces a "very strong headwind" in exports, arguing that recovery in the Chinese economy is key to the emerging region's further growth.
"There's a very strong headwind on the export side. Export has been weakening, and it's been negative for several countries in the region," Khor said. Vietnam is among the hardest hit, he said, with AMRO revising down its projection for the country's 2023 growth to 4.4% from the 6.8% projected in April.
Southeast Asian countries export semiconductors and other components to China, where manufacturers assemble them into smartphones and other products that are shipped to the U.S. and Europe. "So when China's exports are not doing well, the spillover [in] the region is also not very strong," he said. "Which is why exports in the region have not benefited from the recovery in China as much."
"But once the U.S. begins to recover and [China's] exports to the U.S. and Europe pick up, then I think you'll see much stronger imports of China from the [Southeast Asian] region because of the intermediate goods," he said. "Countries like Indonesia and Malaysia export coal and palm oil to China, and it's very, very important for them in terms of supporting growth and also the external balance."
AMRO has upgraded ASEAN's projected growth for next year by 0.1 point to 5.3%. "We think [ASEAN's] export is going to strengthen in the later part of this year, and next year, it's going to be much stronger," Khor said.
Besides goods, Chinese tourism abroad remains weak even after the COVID-19 pandemic. Khor stressed that tourism is essential for most economies in Southeast Asia, especially Cambodia, Thailand and the Philippines.
"Of course, the biggest market in the region is China," he said, noting that Chinese once made up one-third of the tourists in the region but now account for only 8%. "It is still below the pre-pandemic level -- which is a good thing, because it means that there's still a lot of potential for Chinese tourists to come to travel the region, and it would help to support several of the economies in the region."
Regarding the impact of the worsening U.S.-China relationship, he noted that the ASEAN countries have benefited from the "reconfiguration of the supply chain," in which businesses try to build greater resilience amid geopolitical uncertainties.
He pointed out that the primary beneficiaries of this are Vietnam, Thailand and Malaysia -- Indonesia too, he added, because Chinese businesses are "now investing heavily in Indonesia in order to mine nickel and then process it." Nickel is a key material for batteries in electric vehicles and other products.
"So several countries in the region have benefited from this reconfiguration of the supply chain and building greater resilience," he said. "So we think that the confrontation is not necessarily bad for the region."
Source: Nikkei Asia
Share:
<p>Time: 2024 By: Ministry of Industry and Trade</p>
