Association of Southeast Asian Nations (Asean) growth will continue to outperform from a regional and global perspective, a Fitch Group unit said.
The region’s “extremely large market potential,” BMI Research noted, stems from its reform prospects, integration initiatives, demographic trends and “relatively mild: economic imbalances.
“This is particularly true as the global economy risks shifting towards greater trade protectionism, while weak productivity growth and deteriorating demographics are likely to limit the number of fast-growing profitable opportunities in developed markets,” it said in an economic analysis released last Friday.
Continued efforts to reduce trade and investment barriers are expected to spur investment flows, which BMI said would support average real gross domestic product (GDP) growth of 5.1 percent over the next 10 years, higher than the 3.1 percent globally.
Myanmar and Vietnam will be the region’s outperformers but the Philippines was also tagged as a “bright spot” with GDP growth likely to average a solid 6.2 percent over the coming decade. It noted, however, that risks were weighted to the downside as the business environment has been weakening slightly.
BMI pointed out that the Philippines fell by 19 places to 113th in the World Bank’s latest Ease of Doing Business Report.
Other Southeast Asian countries climbed an average of five places in the latest index, which BMI said affirmed a long-held view that reform prospects remained bright in the region.
Asean is also now more integrated than ever but further progress can be made, the research firm said.
“The drive towards establishing the Asean Economic Community (AEC) — promoting free movement of goods, services and skilled labor — has delivered another impetus for the region’s economies to roll back non-tariff barriers to trade and harmonize regulatory procedures,” it noted.
The proposed Regional Comprehensive Economic Partnership and China’s Belt and Road initiative are also expected to bring the region closer together and fuel growth in the coming years.
Political risks across Asean, meanwhile, are significant but manageable, BMI said.
“From a regional perspective, the South China Sea issue is a potential stumbling block that could hold back regional economic integration, but we believe that the countries involved will manage to strike a balance between protecting national sovereignty and their economic interests,” it said.
On the whole, Asean’s short-term political risk indices hold up relatively well from a global perspective, with scores more comparable to developed market averages than emerging market and global averages.