• Capitol gridlock to affect Asean

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    The United States political gridlock poses a significant threat to the growth of the Association of Southeast Asian Nations (Asean), according to a report from Moody’s Analytics.

    “The political impasse in the US is expected to shave 0.5 percentage point off fourth-quarter GDP [gross domestic product]growth, and possibly far more if US lawmakers are unable to lift the debt ceiling,” Frederick Gibson, associate economist at Moody’s Analytics said in the report “Asean Outlook: Returning to Trend.”

    A budget row over President Barack Obama’s health care law led to the partial shutdown of the US government on October 1. An October 17 deadline for the US Congress was set to increase the government’s debt ceiling to prevent it from entering a default.

    Despite this, Moody’s Analytics’ outlook for the region remains positive and essentially unchanged, adding that the steady improvement in the global economy should lift growth in Southeast Asia toward its long-run trend by the end of 2014.

    “Southeast Asia’s economies tend to be export-driven, so the recent stabilization in Europe, upbeat data from Japan, and a policy-induced soft landing in China are all positive for the region,” he added.

    The economist also noted that the most trade-exposed economies—Singapore, Thailand, Malaysia—will be the largest beneficiaries of stronger global demand. Moody’s Analaytics also sees improvement in the economy of the Philippines and Indonesia.

    Furthermore, Gibson mentioned that the improving export sector and lift to confidence from healthier global growth will support domestic confidence and household spending growth through 2014.

    “The investment drive that has gripped the region over the last couple of years should persist in 2014, although the pace of capital accumulation has likely peaked. Consequently we expect the contribution to growth to moderate over the medium term,” he said.

    Meanwhile, the economist reported that central banks across Southeast Asia are expected to keep interest rates in accommodative territory over the next six months, before a renewed tightening cycle commences in anticipation of rising price pressures and a stronger growth profile.

    “Risks from the current US impasse will force central banks to maintain an easing bias in the near term,” he said.

    Gibson further said that the region’s direct trade and financial links with China have strengthened over the last five years, while the US has been a major but fading player.

    “But with the recent US pivot to Asia, governments of Southeast Asia may be able to leverage this rivalry to attract investment, capital and military knowhow,” he said.

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