Southeast Asian economies hit hard by the global crisis expect to return to positive growth in 2010 as signs of recovery started to emerge in recent months following massive government stimulus measures, veteran journalists from the region told a recent symposium.
With demands in the United States — a major export market for many of the southeast Asian nations — not expected to recover anytime soon, the countries need to boost domestic consumption with debt-financed spending to keep their economies going, they said.
Five journalists from key members of the Association of Southeast Asian Nations — Singapore, Malaysia, Thailand, Indonesia and the Philippines — took part in the Oct. 29 symposium organized by Keizai Koho Center to discuss the region’s economic prospect and partnership with Japan. Keiko Chino, a senior editorial writer of the Sankei Shimbun daily, served as moderator.
The sharp fall in demand in the U.S. as the “consumer of the world” following the Lehman Brothers collapse in September 2008 had a huge impact on many export-oriented Asian economies including Thailand, which depends on 50-60 percent of its gross domestic demand on exports, said Nophakhun Limsamarnphun, a senior editor for The Nation daily.
The country’s GDP fell 7.1 percent in the first quarter and 4 percent in the second quarter. And while positive growth is forecast for the second half, Thailand’s economy in 2009 as a whole is still projected to contract by 3-4 percent, Nophakhun said.
“But for next year the outlook is more optimistic. We look forward to seeing a positive growth of 2 to 3 percent for 2010” as a result of the huge stimulus measures introduced by the government, he said.
In January, the Thai government announced a stimulus program worth about $55 billion — equivalent to roughly 6 percent of its GDP — to cover the period through 2011, he noted. The stimulus measures included a cash handout program for about 9 million low-income earners, incentives for companies to retain employees made redundant by the export fall, and job training for laid-off workers.
Despite these efforts, consumer confidence remained weak due in part to the political uncertainties in the country, he said. But consumer confidence has finally started to improve, with domestic auto sales in September recovering for the first time in more than a year and export sectors also picking up in the last few months, and some companies began to rehire some of the laid-off workers, he noted.
The government also introduced medium to longer-term measures in September, including public works projects. To finance the expenditures to build rural roads, new railways, hospitals and schools, the parliament approved a $22 billion borrowing program over the next three years to cover the budget deficit, which is estimated to reach 4-5 percent of GDP, he said.
Singapore — whose total volume of trade is four times its GDP — is fairly vulnerable to external shocks, like a small boat out on the sea at the mercy of waves, said William Choong of The Straits Times.
As the impact of the global crisis sank in, the government set three priorities in its stimulus efforts — saving jobs, helping companies and supporting the families, Choong said.
Part of the stimulus budget was used for aiding employers in the payment of pensions for their workers, goods and services tax rebates to support the household sector, and helping firms get finances for working capital, he said.
“The stimulus measures seemed to have made a difference” although skeptics say the recovery was attributable to external factors, Choong said. Singapore had a strong second and third quarter growth, and GDP contraction for the entire 2009 is now forecast at 2 to 2.5 percent — a sharp improvement from an earlier projection of a contraction of up to 5 percent, he said.
Choong noted that the pattern of recovery in ASEAN countries appears similar to the one they experienced after the 1997-98 Asian financial crisis, when the speed and the scale of recovery was quite fast.
The economic situation remains difficult but the current crisis is less severe than the previous crisis “because we were not prepared” at that time, said Hardev Kaur, a columnist for The New Straits Times in Malaysia.
And a lot of the measures taken in response to the late 1990s crisis, including financial sector reforms, “saved us from even severer situations right now,” she said.
“Today the banking system is much stronger, so it was not badly affected” by the latest crisis, with nonperforming loans accounting for no more than 2 percent of the banks’ total assets, she noted.
Malaysia, also an export-dependent economy whose trade accounts for twice its national wealth, was quick to introduce stimulus measures after the Lehman Brothers collapse, Kaur said. The first program announced in November last year to pre-empt the impact of the crisis, and the second stimulus package unveiled this year, combined account for as much as 9 percent of the nation’s GDP, she said.
While the size of the stimulus programs may be small in absolute terms, it is perhaps one of the biggest worldwide in per-GDP terms, she added.
While the country’s manufacturing industries and electronics component sectors rely heavily on exports, the stimulus efforts focused on sustaining domestic economic activities to make up for the fall in overseas demand due to the crisis, Kaur noted.
The second stimulus package — covering the period up to 2010 — is aimed at reducing unemployment, increasing job opportunities and easing the burden on low-income population, she said. To ensure that the stimulus package is actually doing the job and money is spent on the sectors that need it, a special government unit was set up to monitor progress of the projects and report directly to the finance minister on a weekly basis, she added.
The measures are beginning to show some results, Kaur said. Rural construction projects featured in the stimulus program have generated employment to low-income earners, and the construction sector grew 2.8 percent in the second quarter against a contraction of 1.1 percent in the previous three months, she noted.
The overall economy declined by 3.9 percent in the second quarter but the fall was slower than in the previous quarter. Despite improvement in the second half, Malaysia is still projected to have a negative GDP growth of about 3 percent in 2009, but is forecast to have a 2 to 3 percent positive growth in 2010, she noted.
Arnold Tenorio, the business editor of The Manila Times, said he was not sure whether the Philippines has recovered from the global crisis.
Before the latest crisis, the Philippines was in fact one of the southeast Asian economies least vulnerable to external shocks, he said. Having survived the 1997-98 Asian crisis with a much smaller damage than other countries in the region, the Philippines experienced steady growth for years and was the second-fastest growing economy among key ASEAN members prior to the Lehman Brothers collapse, with the inflation rate at a three-decade low in 2007, he added.
Despite such strong macroeconomic fundamentals, the country was not spared the impact of the crisis, which cut the nation’s GDP growth to the 1 percent range in the first half of 2009, Tenorio said. Still, the government is confident the country has escaped a recession, he added.
The main reason the Philippines has been resilient to previous external shocks was its strong domestic consumption and the relatively low dependence on exports, which accounts for less than 30 percent of its GDP, he said. However, the domestic consumption relied heavily on remittances from Filipinos working abroad to their families back home, and personal consumption slowed in the country as the impact of the crisis spread worldwide, he added.
The government responded to the crisis by suspending its efforts to cut the budget deficit and raising the deficit ceiling to cover a fiscal stimulus program, and temporarily put off certain commitments to free trade agreements with other countries, Tenorio said.
And just as signs of recovery became visible worldwide and people started talking about an exit strategy from the emergency fiscal and monetary policies, the Philippines was hit by a series of devastating typhoons, forcing the government to further raise the budget deficit ceiling and the central bank to give up raising interest rates, he noted.
Riyadi Suparno, managing editor of The Jakarta Post, meanwhile said Indonesia was “quite lucky” to some extent as it escaped serious damage from the global crisis over the past year.
With less dependence on exports than other major ASEAN economies, Indonesia had a large domestic market to rely on as overseas demand fell, Suparno noted.
This year’s presidential election also fueled domestic demand as political parties spent on the campaign, and the re-election of President Susilo Bambang Yudhoyono for another five-year term promises to provide stability, he added.