IN the first half of 2021, Asean-5 countries, comprising Malaysia, Indonesia, Thailand, Vietnam and the Philippines experienced strong, export-driven growth. However, renewed lockdowns amid significant outbreaks of Covid-19 Delta variant cases have dampened business sentiment and consumer spending in this region.
According to the Institute of International Finance (IIF), recovery will likely slow markedly in the second half of 2021 for Asean5.
“Given the rising number of Covid-19 infections, renewed pandemic containment measures, and the slow pace of vaccinations, authorities in Asean-5 countries have been revising down official growth forecasts,” IIF said.
The IIF said it would likely cut its gross domestic product (GDP) growth forecast for region.
In May, it forecast a GDP growth of 5.2% for 2021 and 5.4% for 2022.
Against the backdrop of current economic challenges, the IIF said it expected Asean-5 central banks to maintain their accommodative monetary policy stances well into 2022.
“Most of the countries are still experiencing inflation within the respective target ranges, except for the Philippines,” the IIF said.
“Fiscal policy will also continue to be supportive. While Indonesia, Malaysia, Thailand, and Vietnam have announced fiscal consolidation plans, the pace of adjustment will be modest,” it added.
The IIF noted that due to their economic structure, Asean-5 countries benefitted strongly from the global demand recovery, with exports up sharply in the first half of 2021, particularly in the area of electronic appliances (Malaysia, the Philippines, and Thailand) and commodities (Indonesia and Vietnam).
“Looking ahead, the next stage of the global recovery will likely benefit services rather than goods and, thus, provide less of a boost to Asean-5 economies,” it said.
“Furthermore, the recovery in tourism in the five countries has been slower than our already-cautious forecast in the spring, with the Delta variant posing a new challenge to the sector,” it added.