GROWTH in China and India continues
to be weak in the coming months. Overall growth momentum in ASEAN economies
still shows some resilience, though some signs of slowing are observed,
according to the latest Asian Business Cycle Indicators
(ABCIs).
Continued Euro-area uncertainty will remain a major downside
risk for the ASEAN economies. It affects the ASEAN economies mainly through the
trade channel. The degree to which ASEAN is affected may differ by country. For
instance, a relatively large potential impact can be envisaged in Singapore.
Indonesia will face a decrease of exports, though strong investment will cushion
the negative impact to some extent. On the other hand, the Philippine economy
remains relatively resilient due to its strong domestic demand and Thailand’s
recovery continues to be robust, driven by strong domestic investment under the
uncertainty.
In addition, “indirect channels” of Euro-area uncertainty
through China - via weakening China’s exports to Europe - will have a
non-negligible impact on Southeast Asia. In this sense, recovery of the two
giant economies will be important for the near-term outlook in the region. In
China, declining and weak firm profit remains a challenge; while in India,
domestic demand (both investment and consumption) is unlikely to be an engine
for growth - partly due to the still high inflationary pressure.
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