by AZREEN HANI / pic by AFP
SOUTH-EAST Asia’s (SE Asia) GDP growth is expected to reach 6.1% in 2022, with Malaysia, the Philippines and Vietnam expected to experience high growth.
Lead Asia economist at Oxford Economics Sian Fenner shared his forecast that Malaysia is expected to achieve 6.7% GDP growth, double the pace achieved in 2021.
He shared this projection at an Economic Insight Forum held by chartered accountancy body Institute of Chartered Accountants in England and Wales (ICAEW) earlier this month.
In general, he said SE Asia is expected to be the fastest-growing region in the world in 2022 with a growth forecast of 6.1% as Malaysia stands in good position for reopening while Indonesia is expected to lag in the near term.
“With over 90% of its population fully vaccinated and the recent lifting of the most restrictive measures, the worst seems to have passed for Malaysia,” findings from the fourth quarter (4Q) Economic Insight Forum stated.
“Recovery on industrial production exports and indicators on retail mobility statistics contributed to a strong rebound in household spending in October and November in 2021, which will have a spillover effect on employment and provide confidence for consumer spending.”
It added that the government’s expansionary budget for next year and large fiscal stimulus packages should steady Malaysia’s recovery. This trend is already being reflected in a huge increase in retail and export volumes, which went from more than a 20% deficit year-on-year in 2020 to grow to more than 20% in 2021.
Additionally, the forum expected the supply chains issue to persist well in 2022. “The ease of restrictions since August and relatively healthy world trade activities have contributed to the growth of SE Asia’s manufacturing Purchasing Managers Index.
“Capacity on major shipping routes between Asia, Europe and the US has recovered to pre-shipping levels, up 6% during the first nine months of 2021,” it said.
Nonetheless, capacity at ports will remain tight as Asian manufacturers work through a backlog of orders and strive to meet global demand.
“For example, to meet global demand, Malaysia’s main port, Port Klang, is experiencing the shortest average turnaround time for vessels among major global ports, about two days, while the global average is about one week,” the forum highlighted.
The impact of Omicron variant is expected to be acute but contained to 1Q of 2022.
In the worst-case scenario where economies return to lockdowns, global GDP growth will drop from the current forecast of 4.5% to 2.3%.
This would have a ripple effect on weaker export demand for SE Asia, which is projected to reduce growth from 6.1% to 4.3% in this scenario.
“The Omicron variant poses a risk to the recovery and growth of SE Asia economies, especially if it is able to circumvent the defences built up by the current vaccination progress,” ICAEW Regional Director for China and SE Asia Elaine Hong said in a statement.
“At this turning point, it is essential for governments, businesses and people in the region to demonstrate a spirit of solidarity and take collective responsibility in complying with public health guidelines and diligently reporting Covid-19 infections,” she added.