Regional Economic Trends

Summary

Economic growth in Southeast Asia is estimated to be at 6.1 per cent y/y (year-on-year) in 2007 (vis-à-vis 6 per cent y/y in 2006), maintaining around the same for 2008 as well (ADB 2007). Exceptional performance in both Singapore and the Philippines is propelling the growth in the region. The region is likely to experience a more favourable growth going into 2009, given a more stable outlook both in the domestic and global economy.

The year 2007 started on a good footing until the deterioration in the U.S. sub-prime mortgage market and a tightening in corporate credit conditions disrupted the global financial markets. This created fuzziness in the U.S. growth outlook, though most observers

REGIONAL ECONOMIC TRENDS

• With growth of around 6 per cent, 2007 appears to be another reasonably good year for Southeast Asian economies. Meanwhile, monetary and fiscal policies are expected to remain accommodative, balancing growth and inflation objectives.

• The ASEAN Charter will not only give ASEAN a legal personality but will strengthen its institutional structure and strategically set out the longer term direction for the region.

• Regional economies appear quite resilient over the next two years. But there are economic risks that need to be taken into account, e.g., a possible downturn in the United States and persistently high oil prices that could lead to an economic slowdown in the industrial world.

believe that the downturn in the United States is likely to be modest and short-lived. As for others, China and India remain Asia's main economic drivers with growth close to 8–10 per cent y/y in 2007–2008. While Japan may loose some of its recovery momentum next year, Eurozone, after growing steadily in last few quarters, may start feeling the impact on domestic demand of previous monetary tightening.

Given this, 2007 GDP growth projection for Southeast Asia is heavily influenced by better performance of four major economies — Singapore, Philippines, Indonesia, and Vietnam. Stronger than expected domestic demand reflecting rising income, lower interest rates.