Southeast Asia’s Economies Languish Amid Virus Challenges

The Philippine and Malaysian economies continued contracting in the first three months of the year, adding to signs that some of Southeast Asia’s biggest nations are struggling amid a resurgence in coronavirus cases.

The quarterly figures released Tuesday -- which came in below all forecasts for the Philippines -- add to recent weaker signals from top regional economies Indonesia and Thailand.

Southeast Asia’s Economies Languish Amid Virus Challenges

All four countries have faced a surge of Covid-19 cases in recent weeks, part of the broader challenge across Asia’s developing economies to stem a renewed outbreak, particularly in India. Among Southeast Asia’s biggest economies, only Singapore and Vietnam, which have been able to contain the pandemic, have shown year-on-year expansions in the first quarter.

What Bloomberg Economics Says...

“The weaker data signals recently from across most of Asean suggest a more muted rebound for the region this year, and greater reliance on merchandise exports for growth. Until vaccinations become widespread enough to inhibit the transmission of more infectious Covid-19 mutations, social distancing measures and border restrictions will need to remain in place. At the current pace of inoculation, domestic demand in most of Asean looks set to remain constrained until next year.”

-- Tamara Mast Henderson, Asean economist

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While all those countries expect to see full-year growth, a weak first quarter has tempered the outlook for Southeast Asia. The Asian Development Bank late last month lowered its 2021 forecast for the region to 4.4% and reduced projections for Malaysia, the Philippines and Thailand.

Details of recent first-quarter performance include:

  • Philippine gross domestic product contracted 4.2%, compared to the median 3.2% drop expected in a Bloomberg survey
  • Malaysia shrank 0.5%, compared with a 0.9% estimate
  • Indonesia last week reported a 0.74% contraction, against an expected decline of 0.65%
  • Thailand, which is expected to show a contraction when it reports first quarter figures next week, recently lowered its full-year outlook, with the finance ministry citing poor tourism activity

The Philippines is expected to manage one of Southeast Asia’s slowest recoveries this year. A return to stricter curbs in Manila and other key economic areas threatens the government’s goal of at least 6.5% growth this year, which is up for review. It’s also expected to drive unemployment, which has yet to show considerable improvement.

Malaysia’s Tuesday GDP release came a day after Prime Minister Muhyiddin Yassin announced nationwide movement restrictions to stem the latest surge in cases. Moving forward, the economy will continue to benefit from strong external demand and improving domestic conditions, central bank Governor Nor Shamsiah Yunus said in a briefing.

Indonesia, the region’s biggest economy, expects to grow this quarter at the fastest pace since 2008 as the government turns to fresh stimulus programs to lift domestic demand. Thailand’s Finance Ministry, the first of the nation’s agencies to revise its outlook, last month cut its economic growth forecast for the second time this year as the country grapples with its biggest virus outbreak of the pandemic.

©2021 Bloomberg L.P.

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