Recovering domestic demand and trade partnerships will play a pivotal role in driving the growth of the Association of Southeast Asian Nations (ASEAN) at 5.2% in 2022 following a weak performance of 2.9% in 2021, forecasts GlobalData, a leading data and analytics company.

Animesh Pareek, Economic Research Analyst at GlobalData, comments: “Regardless of the limited growth prospects and rising inflationary pressure globally, the spotlight is on ASEAN nations. Regional trading blocs such as the Regional Comprehensive Economic Partnership (RCEP), coordinated efforts to curtail the COVID-19 pandemic and robust recovery in domestic demand are expected to drive inclusive growth and development in ASEAN.”

Indonesia and Thailand, which are the largest economies in the region, are expected to grow from 3.5% and 1.1% in 2021 to 5.3% and 3.4%, respectively, in 2022. With a supportive fiscal and monetary policy, low public debt ratio, sufficient foreign reserves, exchange rate depreciation, and moderate capital outflows, the Indonesian economy is determined in handling external shocks.

The Bank of Thailand expects a fall of 85% in foreign tourists in 2022 compared to the pre-COVID level in 2019 due to a stringent COVID-19 policy in China, which accounts for a quarter of foreign visitors. Even though there is uncertainty in the market, the private sector confidence and fiscal stimulus by the government are expected to drive the economic recovery in the country.

Pareek continues: “The ASEAN is an export-oriented, attractive destination for foreign direct investment, but uncertainty and risk premium are forcing risk averse investors to leave the market. However, GlobalData expects the Tiger Cub Economies, especially the Philippines, Vietnam, and Malaysia, to grow at 7%, 6.6% and 6.7%, driven by high manufacturing growth of 16.1%, 11.3% and 13.2%, respectively, in April 2022. Indonesia and Malaysia are evidently exploiting the changing trade landscape and have registered an export growth of 27% and 26.3%, respectively, on an annual basis in May 2022.”

GlobalData has revised the 2022 inflation rate projections for the ASEAN region from 3% in February 2022 to 5% in June 2022 due to supply chain disruption, rising fuel and food prices and tightening of money supply in major economies. Myanmar and Laos are expected to have the lowest economic growth of 1.6% and 3.1%, respectively, and the highest inflation rate in the region in 2022.

Pareek explains: “The adverse impact of the Russia-Ukraine war and COVID-19 is further exacerbated by the internal conflict in Myanmar, which encountered an inflation of near 18% in March 2022, according to the Myanmar Market Price Update by World Food Programme. The macroeconomic stability in Laos can be improved by increasing revenue collection combined with better debt management and spending efficiency.”

GlobalData expects Singapore to grow at 3.9% in 2022, a slowdown from the 6.9% growth recorded in 2021, due to strict COVID-19 measures taken by China and supply disruption caused by the Russia-Ukraine crisis. Even though the country reported progress in all sectors, going forward it will be challenging as its largest trading partner, China, is expected to slow down.

Pareek concludes: “ASEAN needs to keep the rising prices under check by replacing the costly fuel subsidy with a well-targeted cash transfer program like Indonesia. The policymakers have moderate-to-ample fiscal space with manageable debt-to-GDP ratio but there is limited space for accommodative monetary policy wherein the public-private partnership can be embraced, and innovative players can be included to follow a sustainable growth trajectory. However, the nations need to avoid premature withdrawal of policies augmenting the growth and reallocate capital and labor to new and budding sectors.”