Global growth slowdown infects Southeast Asia

SOUTHEAST ASIA could expand slower than earlier expected, in line with projected sluggishness elsewhere, the International Monetary Fund (IMF) yesterday said.

In an update to its April World Economic Outlook report, the multilateral lender said ASEAN-5 — composed of the Philippines, Thailand, Malaysia, Indonesia, and Vietnam — is expected to grow by an average of 4.7% this year and 5.1% next year, 0.5 and 0.2 percentage points lower than previously estimated for those respective years.

The report, however, did not contain country-specific forecasts.

The outlook for emerging markets and developing economies as a whole was likewise trimmed by 0.1 percentage point to 4.2% this year, while the growth projection for next year was kept at 4.7%.

“Growth in emerging market and developing economies is projected to slow from 4.6% in 2014 to 4.2% in 2015, broadly as expected,” IMF said. “The slowdown reflects the dampening impact of lower commodity prices and tighter external financial conditions — particularly in Latin America and oil exporters — the rebalancing in China, and structural bottlenecks, as well as economic distress related to geopolitical factor — particularly in the Commonwealth of Independent States and some countries in the Middle East and North Africa.”

Nevertheless, improvement in economic conditions in a number of distressed emerging markets and developing economies is expected to lift overall growth of the grouping to 4.7% in 2016.

Similarly, the IMF cut its growth forecast for advanced economies this year to 2.1%, down by 0.3 percentage point from the April estimate, but retained its 2016 outlook at 2.4%.

“The unexpected weakness in North America, which accounts for the lion’s share of the growth forecast revision in advanced economies, is likely to prove a temporary setback,” IMF said, noting that underlying drivers for economic activity in the United States — such as wage growth, labor market conditions, easy financial conditions, lower fuel prices, and a strengthening housing market — “remain intact.”

On the other hand, economic recovery in the euro zone appears to be “broadly on track,” while growth in Japan came in stronger than expected in the first quarter of the year amid a rise in capital investment. Consumption in Japan, however, remains “sluggish and more than half of quarterly growth stemmed from changes in inventories,” IMF noted. “With weaker underlying momentum in real wages and consumption, the pickup in growth in 2015 is now projected to be more modest.”

Globally, growth of economic activity is expected to be more modest at 3.3%, down by 0.2 percentage point from earlier projection, while the 2016 outlook was kept at 3.8%, the report showed.

“The distribution of risks to global economic activity is still tilted to the downside. Near-term risks include increased financial market volatility and disruptive asset price shifts, while lower potential output growth remains an important medium-term risk in both advanced and emerging market economies,” the IMF said.

“Lower commodity prices also pose risks to the outlook in low-income developing economies after many years of strong growth.” — Daryll Edisonn D. Saclag, Businessworld