Regional Analysis 2020 Southeast Asia

Southeast Asia Market Review 2020

It is a tumultuous period for the Southeast Asian economy, as it is for many regions around the world, and challenging times undoubtedly lie ahead.

4.2%
GDP contraction expected in 2020
4.5%
Economic growth in 2019

Southeast Asia Market Review

As we near the final quarter of 2020 and begin to realise the 'new normal’ of COVID-19, Michael Murphy, Director at Linesight, reviews the Southeast Asian economic performance to date, and what we can expect in the coming months.

While the diversity in Southeast Asia usually makes it difficult to draw broad conclusions and forecasts, there is one particular factor impacting all economies in the region, and globally – COVID-19.

With the US-China trade war having taken its toll on Southeast Asia, growth in the region had slowed between 2018 and 2019, recorded at 4.5% for the year. The latest Global Economic Outlook from Oxford Economics projects the region’s GDP to contract by 4.2% in 2020. Furthermore, the road to recovery is uncertain at present, with global activity sluggish, a resurgence of the virus in some countries and tensions between the US and China rising once again, following the Phase 1 Agreement in early 2020.

Given the abovementioned diversity in-region and the varying mechanisms adopted to control the virus, the economic recovery periods will vary. Countries that have found a balance between kickstarting the economy while suppressing the virus, such as Thailand and Vietnam, are expected to recover in a more timely fashion, while others who were hastier in their easing of restrictions and were hit with a resurgence of COVID-19, such as Indonesia and the Philippines, will endure a more prolonged recovery.

Governments within the region have introduced a range of fiscal stimuli in an effort to keep their economies afloat, from pandemic support payments for citizens to central bank rate cuts. Some countries, such as Vietnam and Malaysia were focused on fiscal consolidation pre-COVID, and yet, faced with this crisis, Vietnam has had to roll out a package equating to 3.6% of GDP. Meanwhile, Singapore’s measures are projected to stand at almost 20% of GDP. However, as the crisis continues to drag on, some of the weaker economies within Southeast Asia will almost certainly struggle to fund another round of stimulus packages.

Summary

It is a tumultuous period for the Southeast Asian economy, as it is for many regions around the world, and challenging times undoubtedly lie ahead. While some countries look to have struck a balance between suppressing the virus while still keeping their economies afloat, and so are well-placed on the recovery trajectory, others appear to have lifted restrictions too early and are now suffering with additional waves of the virus with already weak healthcare systems, inferring a prolonged recovery period. All in all, it looks like the medium to longer-term impacts of COVID will vary significantly in-region.

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Southeast Asia Market Review 2020

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