ASEAN Economy

25 September 2009

ASEAN Outlook No near term trade-off between growth and inflation

Asean’s Government will focus on sustainability of economic growth
Weekly Wrap The pace of contraction in real GDP growth in most Asean economies (especially
in Malaysia, Singapore and Thailand), on a year-on-year basis, has slowed
(18 – 24 September 2009) considerably in 2Q09, recovering gradually from the sharp deceleration in
economic growth in 1Q09. Signs of economic recovery are becoming more
visible, as domestic demand recovers attributed partly to spending increase in
Government expenditures generated by fiscal stimulus measures. For instance,
Singapore’s real GDP growth contracted by -3.5% in 2Q09, but a marked
improvement over the sharp -9.5% decline in 1Q09. In Malaysia, the pace of
contraction in real GDP growth slowed significantly from –6.2% yoy in 1Q09 to –
3.9% in the 2Q09. Similarly, Indonesia’s real GDP growth, which slowed down
slightly from +4.4% yoy in 1Q09 to +4.0% in 2Q09, is expected to pick up from
higher domestic demand.

Consumer and business confidence have recovered in most Asean countries.

For instance, according to the latest Bank Indonesia’s Consumer Survey, the
Consumer Confidence Index (CCI) remained above the 100 level mark for the
fifth consecutive month, at 114.3 in Aug 09 (115.4 in July 09), indicating that
consumers are expecting better economic conditions for the next six months. In
Malaysia, the MIER’s consumer sentiments index (CSI), which is used to gauge
consumer spending trends and sentiments, rose 26.9 bps from 78.9 in 1Q09 to
105.8 in 2Q09 (71.4 in 4Q08). Bank Negara Malaysia (BNM) Governor Tan Sri
Dr Zeti was quoted in the press as saying that the country’s domestic demand is
showing signs of recovery supported by the fiscal stimulus and an
accommodative monetary policy. In line with our earlier expectations, BNM
Governor expect a positive yoy growth in the country’s real GDP by the fourth
quarter. Similarly, Thailand’s Office of Fiscal Budget also noted that the
country’s real GDP is expected to recover from -3 to –4% yoy in 3Q09 to +3 to
+4% in 4Q09 (-4.9% in 2Q09), on the back of improved domestic demand.

The optmistic assessment on the economic outlook by the Asean Government is

also shared by the Asian Development Bank (ADB), which believe the economic
recovery will continue more strongly into 2010. The ADB, in its latest issue of the
Asian Development Outlook 2009 Update, projected that the Southeast Asia
economies will recover from –0.1% in 2009 to +4.3% in 2010, revising up from
+4.2% projected earlier, see Appendix 1. In Malaysia, the ADB expect Malaysia’s
economic growth to pick up from –3.1% in 2009 to +4.3% in 2010, this was
higher than our current expectation of +3.5% for 2010.
Alan Tan While Asean inflation is expected to trend marginally higher next year, on the
Economist
(603) 2145 8210
back of the stronger economic recovery, we believe Asean Central Banks are
alantan@affinsecurities.com.my unlikely to tighten monetary policy by raising policy rates any time soon. Unlike
the situation in 2H08, where Central Banks need to balance between higher
Mohammad Anis Bin Jais inflation and lower economic growth, the focus today remains more on economic
Research Assistant growth to ensure sustainability as the pick up in inflation will likely remain
(603) 2145 0541 manageable. We believe any tightening in monetary policy in the Asean
mohammadanis@affinsecurities.com.my economies will also follow closely the development of US monetary policy and
directions of Fed Funds rate. US Fed continues to anticipate that “economic
conditions are likely to warrant exceptionally low levels of the federal funds rate
for an extended period”.
Fig 1: Last week’s economic releases Fig 2: Upcoming economic releases
Next
Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09
Month1
Malaysia Singapore
Foreign Reserves (US$bn) 87.7 88.3 91.5 91.2 93.3 93.5 IPI (YoY%) -32.7 0.7 2.2 -9.0 12.4 5.0 -

Singapore Thailand
CPI (MoM%) -1.1 0.6 -0.5 1.1 0.4 0.3 CPI (YoY) -0.2 -0.9 -3.3 -4.0 -4.4 -1.0 -1.1
Change YoY% -0.7 -0.3 -0.5 -0.5 -0.3 -0.4 1
General consensus
Source: Bloomberg

Important disclosures at end of report Page 1 of 5

 Appendix I: ADB’s ASEAN GDP and Inflation Projections
Chart 1: Indonesia Chart 2: Malaysia

GDP (ann chg, %) Inflation (ann chg, %) GDP (ann chg, %) Inflation (ann chg, %)

(%) (%)

14 8
6.2
5.8
12 6 4.6
4.2
10
4
8 6.3
6.1 2
5.5 5.4
6 4.3
0
4

2 -2

0 -4 -3.1
2006 2007 2008 2009e 2010f 2006 2007 2008 2009e 2010f

Chart 3: Philippines Chart 4: Singapore

GDP (ann chg, %) Inflation (ann chg, %) GDP (ann chg, %) Inflation (ann chg, %)
(%) (%)

10 10 8.4
7.8
9 8
8 7.1 6
7 3.5
5.3 4
6
5 2 1.1
3.8
4 3.3 0
3
1.6 -2
2
1 -4

0 -6 -5.0
2006 2007 2008 2009e 2010f 2006 2007 2008 2009e 2010f

Chart 5: Thailand Chart 6: Vietnam

GDP (ann chg, %) Inf lation (ann chg, %) GDP (ann chg, %) Inflation (ann chg, %)

(%) (%)
6.0 5.2 25
4.9
5.0
4.0 3.0 20
3.0 2.2
2.0 15
1.0 6.5
0.0 10 8.2 8.5
-1.0 6.2
4.7
-2.0 5
-3.0
-4.0 -3.2 0
2006 2007 2008 2009e 2010f 2006 2007 2008 2009e 2010f

All data for charts sourced from Asian Development Bank (ADB)

Page 2 of 5
 -30
-20
-10
0
10
20
30

-50
-40
-30
-20
-10
0
10
20
30
40
50
0
20
40
60
80
100
120
140
160
180
Jan-00 Mar-00 Dec-00

(US$bn)

(% yoy)
Jun-00

(% yoy)
Oct-00 May-01
Nov-00 Oct-01
Apr-01 May-01
Mar-02
Sep-01 Dec-01 Aug-02
Feb-02
Jul-02 Jan-03
Jul-02
Dec-02 Jun-03
Feb-03 Thailand
May-03 Nov-03
Philippines

Indonesia
Chart 3: Regional IPI

Singapore
Oct-03 Sep-03 Apr-04
Mar-04 Apr-04 Sep-04

Thailand
Aug-04 Feb-05

Singapore
Chart 1: Foreign Reserves

Nov-04
Jan-05 Jul-05

All data for charts sourced from Bloomberg

Jun-05 Jun-05 Dec-05
Nov-05 Jan-06 May-06

Thailand
Malaysia

Apr-06

Malaysia
Oct-06
Singapore

Sep-06 Aug-06
Mar-07
Feb-07 Mar-07 Aug-07
Jul-07
Oct-07 Jan-08
Dec-07
May-08 May-08 Jun-08
Oct-08 Nov-08

Malaysia

Chart 5: Exports (3-month moving averages)

Dec-08

Indonesia
Mar-09 Apr-09
Indonesia

Aug-09 Jul-09 Sep-09

Philippines
-5
0
5
10
15
20

-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14

-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Jan-00
Apr-00

(%)
2Q01
(% yoy)

Jun-00

(% yoy)
Aug-00
Dec-00 4Q01 Nov-00
Apr-01 Apr-01
Aug-01 2Q02 Sep-01
Dec-01
Apr-02 4Q02 Feb-02
Aug-02 Jul-02
2Q03
Indonesia

Dec-02 Dec-02
Singapore

Apr-03 4Q03 May-03

Indonesia
Aug-03

Singapore
Malaysia

Oct-03
Chart 2: Regional CPI

Dec-03 2Q04
Singapore
Chart 4: Regional GDP

Apr-04 Mar-04
Aug-04 4Q04 Aug-04
Dec-04 2Q05 Jan-05
Apr-05
Aug-05 4Q05 Jun-05
Dec-05 Nov-05
Thailand
Malaysia

Apr-06 2Q06 Apr-06

Thailand
Malaysia
Thailand

Aug-06
Indonesia

Dec-06 4Q06 Sep-06

Apr-07 Feb-07
Aug-07 2Q07
Jul-07
Dec-07 4Q07 Dec-07
Apr-08
Aug-08 2Q08 May-08
Dec-08

Chart 6: Imports (3-month moving averages)

Oct-08
Appendix II: ASEAN Charts for the Week of 18 – 24 September 2009

Apr-09 4Q08 Mar-09

Philippines

Aug-09
Philippines

Aug-09

Philippines
2Q09

Page 3 of 5
 Appendix III: Monthly ASEAN Economic Data Trends
Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09

Indonesia
CPI (MoM%) 0.0 -0.1 0.2 0.2 -0.3 0.0 0.1 0.5 0.6 -
Change YoY% 11.1 9.2 8.6 7.9 7.3 6.0 3.7 2.7 2.8 -
Exports (YoY%) -20.0 -35.5 -32.8 -27.6 -22.6 -28.7 -26.8 -23.0 - -
Imports (YoY%) -7.5 -31.3 -39.7 -36.2 -42.4 -34.5 -34.5 -32.5 - -
Foreign Reserves (US$bn) 51.6 50.9 50.6 54.8 56.6 57.9 57.6 57.4 57.9 -
Trade Balance (US$bn) 1.0 0.5 1.1 2.1 1.7 1.6 1.4 1.0 - -

Malaysia
CPI (MoM%) -1.0 -0.1 0.2 -0.2 -0.2 0.2 0.1 0.1 0.2 -
Change YoY% 4.4 3.9 3.7 3.5 3.0 2.4 -1.4 -2.4 -2.4 -
Core CPI (MoM%) -1.5 -0.2 0.3 0.0 0.0 0.1 0.0 0.0 0.2 -
Change YoY% 1.6 1.1 1.1 1.1 1.0 1.0 -3.5 -4.5 -4.2 -
Industrial Production (YoY%) -15.9 -17.9 -12.5 -12.7 -11.7 -11.3 -9.5 -8.4 - -
Exports (YoY%) -14.9 -27.9 -16.0 -15.7 -26.3 -29.7 -22.7 -22.8 - -
Imports (YoY%) -22.8 -30.4 -27.6 -29.0 -22.4 -27.8 -20.9 -16.0 - -
Foreign Reserves (US$bn) 91.4 91.3 91.1 87.8 87.7 88.3 91.5 91.2 93.3 93.54*
Trade Balance (US$bn) 3.3 2.5 3.3 3.6 2.1 2.9 2.6 2.2 - -

Philippines
CPI (MoM%) -0.9 0.3 0.5 0.1 0.5 -0.1 0.6 0.3 0.2 -
Change YoY% 8.0 7.1 7.3 6.4 4.8 3.3 1.5 0.2 0.1 -
Core CPI (YoY%) 7.3 6.9 6.4 5.6 5.0 4.4 3.9 3.6 2.9 -
Exports (YoY%) -40.3 -40.6 -39.1 -30.8 -35.2 -26.9 -24.8 -25.4 - -
Imports (YoY%) -34.0 -34.5 -31.9 -36.2 -37.4 -24.3 -22.8 - - -
Foreign Reserves (US$bn) 37.1 39.6 39.3 38.9 39.5 39.3 39.5 40.2 41.5 -
Trade Balance (US$m) -626 -759 -552 -363 -239 -529 -701 - - -

Singapore
CPI (MoM%) -0.6 -0.1 -0.5 -0.4 -1.1 0.6 -0.5 1.1 0.4 -
Change YoY% 4.3 2.9 1.9 1.6 -0.7 -0.3 -0.5 -0.5 -0.3 -
Industrial Production (YoY%) -13.4 -26.3 -11.8 -32.7 0.7 2.2 -9.0 12.4 - -
Non-oil Domestic Exports (YoY%) -20.8 -34.9 -23.8 -17.3 -19.2 -12.6 -11.1 -8.7 -7.1 -
Imports (YoY%) -16.7 -33.4 -20.3 -28.1 -31.1 -27.7 -26.4 -27.3 -21.3 -
Foreign Reserves (US$bn) 174.2 167.1 163.6 166.3 170.1 171.8 173.2 174.1 176.3 -

Thailand
CPI (MoM%) -1.6 0.0 1.0 0.5 1.0 -0.3 0.4 0.0 0.4 -
Change YoY% 0.4 -0.4 -0.1 -0.2 -0.9 -3.3 -4.0 -4.4 -1.0 -
Core CPI (MoM%) -0.1 -0.1 0.4 0.0 0.1 -0.6 0.2 0.0 0.0 -
Change YoY% 1.8 1.6 1.8 1.5 1.0 -0.3 -1.0 -1.2 -0.2 -
Industrial Production (YoY%) -18.5 -21.2 -20.3 -14.9 -9.7 -9.8 -8.3 -7.3 - -
Exports (YoY%) -15.7 -25.3 -11.1 -22.7 -25.2 -26.5 -26.4 -25.7 - -
Imports (YoY%) -8.8 -36.5 -43.5 -35.1 -36.4 -34.3 -26.3 -31.7 - -
Foreign Reserves (US$bn) 110.9 110.7 113.3 116.4 116.9 121.5 121.6 123.5 127.00 130.6**
Trade Balance (US$bn) 0.5 1.7 3.9 2.2 0.6 2.3 0.9 0.8 - -

Vietnam
CPI (MoM%) -0.7 0.3 1.2 -0.2 0.4 0.4 0.6 0.5 0.2 -
Change YoY% 19.9 17.5 14.8 11.3 9.2 5.6 3.9 3.3 2.0 -
Industrial Production (YoY%) 14.6 -4.4 2.5 2.1 3.3 4.0 4.8 5.1 5.6 -
Exports (YoY%) 29.5 -24.2 -5.1 2.4 -0.1 -6.8 -10.1 -13.4 -14.2 -
Imports (YoY%) 28.3 -44.8 -43.1 -45.0 -41.0 -37.0 -34.1 -32.0 -28.2 -
Trade Balance (US$bn) -17.5 0.4 0.3 1.6 0.4 -1.1 -2.1 -3.4 -5.1 -

Gross Domestic Product (YoY%) 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
Indonesia 5.85 6.25 6.42 6.40 5.18 4.40 4.00
Malaysia 7.30 7.40 6.70 4.70 0.10 -6.20 -3.90
Philippines 6.40 3.90 4.20 4.60 2.90 0.40 1.50
Singapore 5.40 6.70 2.50 0.00 -4.20 -9.50 -3.50
Thailand 5.70 6.00 5.30 3.90 -4.20 -7.10 -4.90
Vietnam 8.50 7.40 6.50 6.50 6.20 3.10 3.90
* Week ended 4 September 2009
** Week ended 11 September 2009

Source: Bloomberg

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