PETALING JAYA: Asean economies’ growth has so far been driven by exports recovery, with domestic demand factors including private consumption still patchy.
Morgan Stanley Research economists said in a report that private comsumption had been uneven across the five markets it covered.
They noted that private consumption continued to register a healthy pace in Malaysia and the Philippines but “moving sideways” in Indonesia while it had been less inspiring in Thailand and Singapore.
Malaysia, which posted a 32.5% year-on-year surge in exports for May, will be releasing second-quarter ended June 30 gross domestic product (GDP) data on Aug 18.
Private consumption in Malaysia has been resilient despite inflationary pressure, low-wage growth and higher unemployment, with several analysts attributing gains in the stock market for an improvement in still-fragile consumer confidence. The FBM KLCI has gained nearly 7% year-to-date.
Morgan Stanley expects consumer spending to remain healthy, growing at 6.6% this year and 6.4% next year, with exports recovery to give a boost to employment and wage growth.
While the outlook for Singapore’s economy has improved after the island-state narrowly avoided recession with a 0.4% GDP growth for the second quarter ended June 30 compared to the first quarter’s 1.3% contraction, private consumption remains tepid.
On a year-on-year basis, GDP expanded 2.5% for the second quarter compared to the same quarter last year, which was also revised to 2.5% from 2.7%.
Singapore’s growth was mainly driven by an improvement in manufacturing activities, especially from electronics and precision engineering industries, due to stronger global demand.
Notably, the services sector, making up two-thirds of its economy, recovered to a growth of 0.4% in the second quarter compared to the 2.7% contraction in the first quarter.
AmBank Research chief economist Anthony Dass said in Singapore’s case, growth sustainability really depended on the outlook of the services sector and whether it could absorb any shortfall arising from the manufacturing sector.
However, signs continue to show improvement in domestic-economy factors, with Dass noting that the property market may have hit rock bottom.
The construction sector, another domestic-economy indicator, also showed recovery, expanding 4.3% compared to the previous quarter, the strongest showing in six quarters.