The latest Economic Outlook report from Oxford Economics (OE), commissioned by chartered accountancy body the Institute of Chartered Accountants in England and Wales’s (ICAEW), predicted that South-East Asia’s GDP will rebound strongly to 4.8% in 2021, after contracting 4.1% in 2020.
This rebound will be due to an improvement in global trade activities, accommodative macro-policies, continued government fiscal support and low interest rates across the region. Growth is also forecast to improve to 6.5% in 2022 as countries move closer to herd immunity and the recovery becomes more synchronised across sectors.
South-East Asian economies will continue to experience varying speeds of recovery in 2021, driven by countries’ abilities to contain fresh waves of COVID-19 infections and their success in vaccine procurement and distribution.
Uncertainties remain as rates of recovery will depend on the progress of vaccine rollouts and whether the possibility of further lockdowns remains high in the near-term. However, the economic outlook report is optimistic about regional growth prospects for South-East Asia in the medium to long-term.
The report assumes that around 60% of the Malaysian population will be fully vaccinated by the end of the year. This will allow more sustainable easing in restrictions and boost services and social spending.
In fact, like all other ASEAN countries, the report predicts that Malaysia will see more GDP growth in H2 2021 than the average pre-COVID-19 GDP growth from 2011 to 2019. Malaysia’s GDP is expected to grow by 5.3% by the end of 2021, after having contracted by 5.6% in 2020.
Singapore and Vietnam are expected to continue leading the region in recovery. Despite a resurgence of COVID-19 cases in Vietnam, which has affected its manufacturing sector and export industries, its economy is predicted to rebound swiftly once restrictions are lifted.
Similarly, Singapore’s success in rolling out the vaccines greatly contributes to an optimistic outlook for it, and the country is the only one in the region expected to reach herd immunity by the end of 2021.
Singapore’s GDP is expected to recover to 6.4%, after contracting 5.4% in 2020, despite a possible short extension of its Phase 2 Heightened Alert.