East Asian Emerging Market Economies – November 2014
Moderate sub-trend growth continues across the emerging market economies of East Asia (S Korea, Thailand, Taiwan, Malaysia, Indonesia, Singapore, HK and Philippines). Growth in the region to increase gradually through the next couple of years.
- Moderate sub-trend growth continues across the emerging market economies of East Asia (S Korea, Thailand, Taiwan, Malaysia, Indonesia, Singapore, HK and Philippines). This reflects the impact of lack-lustre growth in world trade on activity in the region’s open economies along with domestic economic problems in Indonesia, the region’s biggest economy, that have reduced mineral exports and business investment
- Sluggish regional export volume growth has flowed into modest rates of growth in key parts of East Asian domestic demand, such as consumer spending and business investment, placing downward pressure on household incomes, profits and business investment. Modest rates of growth in domestic spending across the region have, in turn, led to only modest growth in imports and that has led to a leveling out in exports from Australia and New Zealand to the Asian Emerging Market Economies.
- Modest growth in activity has contributed to very low rates of inflation across the region, with the exception of Indonesia where subsidy cuts have increased fuel prices. Low regional inflation has allowed central banks to cut their policy rates to historically low levels and, while we think policy rates have bottomed, there is no urgency to “normalise” them higher.
- The higher $US and lower oil prices should support growth across much of the region but the weaker yen will put pressure on exporters in S Korea and Taiwan. Although they have remained competitive by refusing to lift the prices their customers pay, this has been at the cost of a profit squeeze while their counterparts in Japan have boosted their earnings.
- We expect growth in the region to increase gradually through the next couple of years. Growth slowed to 3.7% yoy in June quarter 2014, well below its 5% long run trend, and we expect it to reach 3.8% this year before climbing to 4% in 2015 and 4¼% in 2016.
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About the Author
Tom joined NAB in 1996 after working for the Australian government within both the Federal Treasury and the Department of Foreign Affairs and Trade. Prior to this, Tom gained experience within the wool industry.
At NAB, Tom heads up the international economics team and is responsible for forming the banks views on economic conditions in the global economy. He manages the monitoring and forecasting of numerous economies around the world, with a particular focus on the US, China, emerging Asia, UK, Euro-zone and New Zealand.
Tom studied economics at the University of Wales, where he also completed his PhD.
