Regional Analysis 2020 Southeast Asia

Southeast Asia Market Review 2020

The US-China trade war has unsurprisingly impacted Southeast Asia, causing growth in the region to slow between 2018 and 2019.

4.5%
Economic growth 2018-2019
4.5%
Expected economic growth in 2020

Asia market summary 2020

Asia market summary 2020

Southeast Asia Market Review

Michael Murphy, Director at Linesight, reviews the Southeast Asia construction industry performance in 2019, and looks forward to what we can expect in 2020 and beyond.

While the diversity in Southeast Asia makes it difficult to draw broad conclusions and forecasts, there are a small number of common factors impacting all economies in the region to various extents.

The US-China trade war has unsurprisingly impacted Southeast Asia, causing growth in the region to slow between 2018 and 2019, recorded at 4.5% for the year. As we will mention in our Singapore market review, its economy recorded a particularly poor performance – its worst in ten years – driven by a contraction in the manufacturing sector in Q4, attributable to an output decline in electronics, chemicals and transport engineering. Vietnam has been the outlier in the region with a remarkable year and GDP growth at 7%, having benefited as a result of companies trying to move their supply chains from China to other parts ofSoutheast Asia to avoid tariffs.

The Phase 1 Agreement, announced in early 2020, has been welcomed with cautious optimism, and regional exports and private investment are expected to remain somewhat subdued. Central banks within the region are adopting monetary policies geared towards stimulating the economy and moderating the economic slowdown. Given its particularly uncertain trade environment, Singapore is benefitting from past fiscal surpluses, allowing the administration to potentially ease policy.

The US-China trade war has slowed GDP growth in Southeast Asia between 2018 and 2019, recorded at 4.5% for the year.

While fiscal stimuli packages are expected across the region for the most part to support domestic demand, given their levels of public debt, Vietnam and Malaysia are somewhat restricted, and we expect that they will remain focused on fiscal consolidation.

Looking to the future, GDP growth in the Southeast Asia region is expected to remain at 4.5% in 2020. The volatility of US-China relations are still a very real threat to the regional performance, and increased protectionism could be seen in due course.

Construction

Construction demand in the region is driven by the infrastructure requirements arising from the ongoing considerable economic and population growth, and it is expected to extend across multiple facets of the sector from energy and water to road and rail. The total infrastructure required in the region has been predicted to increase from US$2.8 trillion to US$3.1 trillion by the Asia Development Bank as a result, translating to an annual investment of between US$184 billion and US$210 billion.

Indeed, the construction sector is heavily referenced in each of the market reviews that follow for the individual regions.

Contributors: John Butler and Michael Murphy

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Southeast Asia Market Review 2020

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