Asian export rebound to fuel faster economic growth in 2018
TOKYO-Against a backdrop of growing optimism, fueled by rising exports, China's economy will grow by an inflation-adjusted 6.4% and four big Southeast Asian economies will log combined growth of 5.2% this year, according to a forecast by the Japan Center for Economic Research.
JCER raised its 2018 growth outlooks for China and the ASEAN4 by 0.2 percentage point each from the previous forecast in August 2017. GDP growth in Malaysia is expected to reach 5.2% this year, up 0.7 point, while Thailand's growth outlook was raised to 3.9%, up 0.5 point.
Growth in Indonesia and the Philippines, whose economies are relatively dependent on domestic demand, is expected to accelerate slightly in 2018, with GDP rising 5.3%, and 6.9%, respectively, unchanged from the previous survey.
Exports of electronic components such as semiconductors, which contributed to a broader recovery in Asian exports in 2017, are expected to continue to grow in 2018, but at a slower pace. Weakening global demand for smartphones and higher interest rates are potential drags on the regional economy.
Until last year, strong demand for smartphones pushed up demand for semiconductors. But the smartphone market is reaching saturation, and demand for chips seems to have peaked. Chip demand for data centers and cars is growing at a steady pace, but if smartphone demand falls more sharply than expected, exporters will not be able to count on further growth. U.S. trade protectionism is another significant risk.
JCER's "Seventh Asia Economic Short-Term Forecast" covers China and four key economies in the Association of Southeast Asian Nations: Indonesia, Thailand, Malaysia and the Philippines.
Exports from these countries have remained strong since the latter half of 2016, supported by the global economic recovery. Shipments of electronic parts for smartphones and other products have risen, and conditions in the energy and minerals markets have also improved, helping resource exporters such as Indonesia and Malaysia.
Robust exports in these countries have had a ripple effect on their domestic economies, leading to improvements in employment and wages, and to solid growth in consumption. In the Philippines, infrastructure investment also contributed to expanding domestic demand. Real gross domestic product growth in 2017 accelerated to 6.9% in China and 5.2% in the ASEAN4.
China's economy has been supported to some extent by government investment, but is expected to gradually slow as companies pay down more debt. In addition, export growth is likely to decline further, cutting the country's GDP growth to 6.2% in 2019. China's slowdown will also weigh on Malaysia and Thailand, whose economies rely heavily on Chinese import demand.
Malaysia's growth rate is projected to fall to 4.7% in 2019, and Thailand's to 3.4%. Indonesia and the Philippines, which have relatively weaker trade links with China, are expected to maintain strong growth, reaching 5.3% and 6.9%, respectively, in 2019, unchanged from this year's forecast. In the ASEAN4 as a whole, growth is forecast to decline to 5.0% next year.