DOHA, January 21, 2023 (Xinhua) – A report by Qatar National Bank expected today (Saturday) that the Southeast Asian region “ASEAN 6” will regain its leading role in global growth and its superior economic performance this year, driven by several factors, including the reopening of the Chinese economy, which will affect the region and the world.
The bank said in its weekly report that for the first time in two years it is expected that the growth difference between the ASEAN countries, especially the 6 largest economies in the association Indonesia, Thailand, Singapore, Malaysia, Vietnam and the Philippines, and the developed economies will exceed long-term historical standards.
He explained that the average long-term growth in advanced economies historically was 1.85 percent in the pre-COVID-19 period, while it was 5 percent in the “ASEAN 6” economies.
He stated that this difference in growth of 315 “basis points” indicates that Southeast Asian countries can catch up at a relatively rapid pace with the level of per capita income in advanced economies, if they maintain this growth rate for more time.
He pointed out that the Southeast Asian region, before the outbreak of (Covid-19), was one of the most active economic regions in the world, as it had been stimulating opportunities and growth on a large scale for several decades, but there was a noticeable change in the scene due to the transformation resulting from (Covid-19). As the “ASEAN 6” countries are lagging after they were leading countries in terms of economic performance in the short term.
However, he stated that catching up with advanced economies has returned to the right track, although the growth rate of the economies of the “ASEAN 6” countries is still below its average growth before (Covid-19), because these economies enjoy greater flexibility in the current macro scenario that achieves It has strong growth at a level close to 5 percent.
The report said that there are three factors that support the expectations of an increase in the average performance of the ASEAN countries, which are the slowdown in growth in the advanced economies, stronger domestic macro fundamentals, and Chinese reopening, which it stressed should lead to the return of the superior economic performance of the “ASEAN 6” countries.
And he indicated that with regard to the prospects for advanced economies, they are particularly difficult due to the large accumulation of macro imbalances and the negative impact of special geopolitical shocks, including the effects of excessive stimulus during the post (Covid-19) period, tight labor markets and the Russian-Ukrainian war.
High inflation rates, low real disposable income, high interest rates, low support provided through economic policies and the European energy crisis will affect the growth of advanced economies, resulting in below average performance.
As for the second factor, the report believes that the six ASEAN countries do not face the types of economic imbalances that most advanced economies are expected to suffer from during the coming period.
In contrast to countries suffering from tight labor markets, rising inflation, energy supply constraints, and running out of policy space for further stimulus, most of the six ASEAN countries are still running with some spare capacity since the COVID-19 shock.
This translates that there is more room for growth or even stimulation of their economies beyond the potential of the GDP for some time without producing continuous unnecessary inflation, especially since the six countries have sufficient external buffers to mitigate the effects of tightening global liquidity and slowing growth in advanced economies.
This would protect the currencies of the six countries from depreciation and prevent the disruptive rise in imported prices, allowing for less restrictive monetary policies and more supportive credit conditions.
With regard to the third factor, the report said that the impact of China’s economic reopening is set to extend to the broader Asian region, stimulating growth, indicating that China is rapidly moving away from “zero cases of Covid” policies, such as travel bans, imposing closures and strict social divergence measures, aimed at Curbing waves of new virus cases.
He added that China, which is the largest Asian economy, is also working to accelerate the stimulation of its economy, and its growth has a large multiplier effect that often extends worldwide, especially to the ASEAN countries, and this applies to countries that depend on manufacturing for export purposes in Asian manufacturing centers such as Thailand, Malaysia and Vietnam, and producers of commodities such as Indonesia, Malaysia and the Philippines.
Besides, regional tourism would also receive a significant boost with the return of Chinese travelers, as this provides a tangible positive backdrop for growth across the ASEAN 6 countries, according to the report.