Growth across Southeast Asian economies contracted in the third quarter of 2021, because of the challenges of the COVID-19 Delta variant. However, Southeast Asia is expected to be the fastest-growing region in the world in 2022 with a growth forecast of 6.1%, as a result of high immunisation coverage with Malaysia just behind Singapore in fully vaccinated population.
The forecast was presented by Sian Fenner, Lead Asia Economist at Oxford Economics, at an Economic Insight Forum held by chartered accountancy body ICAEW on December 2. At the forum, industry leaders and experts discussed Southeast Asia’s economic outlook, with a focus on regional trade agreements and their impact on supply chains and business relations.
Sian was joined by other panellists: Csilla Lakatos, Senior Trade Economist for Indonesia and Timor-Leste, World Bank; Edwin Yap, Executive Director, CJ Century Logistics; and Elaine Hong, ICAEW Regional Director for China and Southeast Asia. They also discussed the importance of free-trade agreements and the implications of diversifying sourcing and production.
The forecast given at the event showed that recovery lagged for Southeast Asian economies in Q3 2021, as countries battled a resurgence of cases due to the spread of the Delta variant. Tightened restrictions weighed heavily on consumer spending, while significant disruptions in production and weakened manufacturing hindered growth across the region.
Vietnam recorded a 12% fall in manufacturing activity quarter-on-quarter, which contributed to a lower GDP forecast of 6.2% on the year, a record low for the region’s best performing economy during the pandemic. GDP in Malaysia, Philippines, Thailand, and Vietnam in Q3 2021 was 4% to 6% lower compared to pre-pandemic growth in Q4 2019 and was only marginally higher in Singapore.
Prospects for Southeast Asia in the year ahead are brighter, driven by easing restrictions and improved mobility as the pace of vaccinations steps up across the region. The lifting of restrictions and resumption of domestic tourism should also see a strong rebound in household spending and services in 2022.
Overall, Southeast Asia’s GDP growth is expected to reach 6.1%. Malaysia, the Philippines, and Vietnam are expected to experience high growth in 2022, with Malaysia forecast to achieve 6.7% GDP growth, double the pace achieved in 2021. Indonesia’s GDP is also expected to increase from 1.4% to 6.0%, a healthy growth after two years of falling below trend. In Singapore, GDP growth will be more muted at 3.8%.