Economic growth across the Southeast Asia region is expected to slow to 5 per cent in 2019, following an estimated 5.3 per cent in 2018, according to the Institute of Chartered Accountants in England and Wales (ICAEW)’s latest Economic Insight: South-East Asia report.

Economic growth continued to moderate across most Southeast Asian economies in the third quarter, with average GDP growth slowing to 4.8 per cent year-on-year from 5.2 per cent in the second quarter. 

Vietnam was the exception, however, with GDP growth of 6.9 per cent year-on-year, up from 6.7 per cent in the second quarter, as FDI inflows continued to support growth in manufacturing activity and exports.

US-China trade tensions and the resulting slowdown in Chinese demand will weigh significantly on Southeast Asian growth, especially for export-dependent economies with a high level of exports to China, such as Singapore and Malaysia.

GDP growth across the region is set to slow next year, as many economies are small, open, and heavily dependent on exports to China, due to both supply-chain linkages as well as tightening Chinese domestic demand. 

Among Southeast Asian economies, Singapore is expected to experience the sharpest slowdown, with the country’s GDP growth set to moderate from an expected 3.3 per cent in 2018 to 2.5 per cent in 2019. 

Conversely, Indonesia and the Philippines will be the least affected. As such, while growth is set to ease in Vietnam, Indonesia and the Philippines in 2019, they will still be among the top ten fastest-growing economies globally.

“In line with our simulation of US-China tariffs, using The Oxford Economics’ Global Economic Model to estimate the impact of the trade war on countries’ GDP growth by 2020, we expect Asian economies with the closest ties to China to experience the hardest hit in a trade war,” said Ms. Sian Fenner, ICAEW Economic Advisor & Oxford Economics Lead Asia Economist. 

“Against a challenging global backdrop, we expect that the knock-on impact of the US-China trade war will be greater in 2019, resulting in a trimmed growth forecast for the region to 5 per cent in 2019, with the global macroeconomic context still reasonably constructive.”

VN Economic Times