Study also shows Indonesia will be the driver of regional growth as Western share of global GDP falls.
Domestic consumption will be a key driver as ASEAN economies continue to outperform Western counterparts, according to ICAEW’s inaugural quarterly Economic Insight: South East Asia report, launched today. This coincides with an expectation that the Western world’s share of global GDP will fall to under 50% within the decade, marking the end of 500 years of economic dominance.
Produced by Cebr (The Centre for Economics and Business Research), ICAEW’s partner and global economic forecaster, this is a new quarterly snapshot analysis of key economic facts and trends, focusing on the six largest countries in the Association of South East Asian Nations (ASEAN); Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
The report predicts that EU-styled political integration is unlikely for ASEAN in the foreseeable future owing to the large difference in economic development and national income levels. However, the relationship between member nations has evolved and ASEAN has changed from a group of countries that compete for foreign investments into an assembly that mutually reinforces progress through greater regional linkages and trade.
Speaking at the launch of the Economic Insight at the Fullerton Hotel in Singapore, Douglas McWilliams, chief executive of Cebr, said: “South East Asian countries span a wide range of income economies and the increased specialisation and division of labour within ASEAN will be of great benefit to member states. Competitive labour costs in low and lower-middle income countries will become increasingly attractive for global companies seeking to site their manufacturing bases, while extensive fossil fuels deposits and land resources will provide member states the resources to fuel their growing economies.”
He continued: “The success of the Iskandar Malaysia economic zone in South Johor is one obvious example of how regional cooperation is mutually beneficial to partner countries, with Malaysia’s highly productive, yet affordable, labour force complemented by Singaporean know-how.”
Mark Billington, Regional Director, ICAEW South East Asia, said: “ASEAN was found to be the most economically successful emerging region in GDP growth terms since 2010, and it is expected to outperform the rest of the world economy going into 2012. Growing private consumption among the expanding middle classes of emerging ASEAN economies is expected to be the main driver for long-term sustainable growth. Growing the pool of finance professionals with international experience and the highest technical knowledge is important for the ASEAN countries to make the most of these opportunities.
"The report also found that from a longer-term economic perspective, the challenge for most countries in the region is to make a similar transition towards industrialisation that other ASEAN nations have achieved before them. Vietnam will need to invest heavily in infrastructure and education in order to replicate the success of Malaysia. Malaysia must take the next step in forging an economic and regulatory system if it is to replicate Singapore’s success in building an internationally competitive and widely diversified industrial base.
Other key findings of the report include:-
Trade with China is expanding quickly
ASEAN export volumes to China have been rising more quickly than to other major trading partners. India will take China’s place as a fresh source of growth when the ageing population in China begins slowing down its economy from around 2030.
Monetary tightening and weak Western growth to curb trade
The global economy is slowing noticeably after its strong 2010 performance, and a gradual reduction in both public and private sector debt burdens in industrialised nations will hold back consumption, resulting in several years of elevated unemployment and below-trend growth in western economies of North America, Western and Central Europe.
Indonesia as the driver of regional growth
Indonesia provides 31% of ASEAN’s output expansion in 2010 and, with its 234 million people, is expected to make an even bigger contribution of 42.8% to ASEAN growth in 2012. Singapore is second with 21.5%, followed by Thailand with 17.6% and Malaysia with 12.1%. Vietnam contributed 5.0% despite its low per capita income level.
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