The Regional Economies: A Year of Growth, Stability, and Resilience

Summary

For Southeast Asian economies, the year 2006 was marked by vibrant growth, improving economic stability, and an unexpected degree of resilience to external and domestic shocks. In this sense, it can be said that 2006 was one of the best years for the regional economies since the Asian financial crisis erupted in 1997.

This article is divided into two main sections. In the first, we take a pan- regional approach, reviewing the main factors that drove growth in the region, assessing the sustainability of the improved stability indicators and analysing the reasons for the improved resilience. In the second section, we will review the progress of economies in the core ASEAN region, focusing on these because of the considerably better data available.

Economic Growth was Driven Significantly by External Demand

Table 1 sets out the economic performance of the region in 2006 compared with recent history. In general, growth in gross domestic product (GDP) across the region picked up momentum from 2005, with the first half of 2006 showing particular strength. However, economic data for the second half of the year showed some loss of momentum, though not a serious one.

Table 2 brings this out more clearly for those economies where quarterly data is available. Except for Indonesia, growth momentum began to flag a little in the third quarter. Several features of economic growth in 2006 merit comment.

First, the region's competitive positioning in global exports has been maintained despite the emergence of strong new competitors such as China. As Figure 1 shows, ASEAN's share of global exports has stayed above 6 per cent in recent years. This helped the region to benefit from the strength in external demand. The World Bank 2 estimates that global output growth increased to 3.9 per cent in 2006 from 3.5 per cent in 2005 and 3.0 per cent in 1980– 2000. World trade volume grew by a probable 9.7 per cent in 2006 compared with 7.7 per cent in 2005.