2H ASEAN-5 economies to ease, says Indian credit watcher

Economic growth in the Association of Southeast Asian Nations-5 or ASEAN-5 would taper off this second half of the year, according to a Mumbai-based credit rating firm. In a commentary titled “Better-than-anticipated growth will likely moderate in 2011 as stimulus measures are wound back," Credit Rating Information Services of India Ltd. (CRISIL) chief economist Dharmakirti Joshi said economies of the ASEAN-5 would slow down to 4.8 percent in the second half of the year. “The weaker second-half outlook is due to the waning impact of inventory restocking off a weak base, fiscal stimulus withdrawal, and monetary policy tightening," he explained. Indonesia, Malaysia, Philippines, Vietnam, and Thailand make up the ASEAN-5, whose economic growth averaged 7.9 percent in the first half of the year, said Joshi. He pointed out that Vietnam and Malaysia lead the group in terms of economic growth, while Indonesia, Thailand, and the Philippines are on track toward economic recovery. The Philippines posted a gross domestic product (GDP) growth of 7.9 percent in the first half of the year. “In the Philippines, election spending drove private and government consumption, while in Vietnam, government stimulus measures coinciding with the festive season boosted trade, tourism, and retail activity in the first half," Joshi said. The Development Budget Coordination Committee revised the Philippines’ GDP growth target to a range of 5 to 6 percent from 2.6 to 3.6 percent this year on the back of stronger-than-expected economic recovery that started in the first quarter of the year. New York-based financial services firm Standard & Poor’s — with CRISIL one of its subsidiaries — has retained a stable outlook for the Philippines but continued to rate the country’s sovereign bonds three notches below investment grade. Joshi pointed out that the region’s higher demand for goods has fueled the economic growth of ASEAN-5 since most of its members are export dependent. “Overall, a surge in investment and net exports supported by consumption growth has spurred ASEAN-5’s growth. A V-shaped recovery is firmly on track but growth is likely to taper off toward the second half of 2010 as stimulus is unwound and the restocking cycle completes," he said. In the case of the Philippines, 70 percent of its economic output is consumer driven. S&P also expects average inflation in ASEAN-5 kicking up in the second half of the year due to the region’s strong economic rebound. “While first-half inflation has generally stayed within ASEAN-5’s central banks’ target ranges, we expect it to nudge upwards in second half of 2010 and stay there in 2011 as concessions are withdrawn and economic growth strengthens," Joshi said. The Bangko Sentral ng Pilipinas (BSP) maintained this year’s inflation forecast at 4 percent, but raised next year’s forecast to 3.25 percent instead of 3 percent. For 2012, the BSP sees inflation averaging 2.97 percent. JE/VS, GMANews.TV