Weather the slowdown with Southeast Asian economies

As data over the past few weeks from a number of countries have indicated, Southeast Asian economies continue to prove their resilience in spite of the pervasive global macroeconomic headwinds generated from China and the euro zone crisis. 

Image courtesy Randy Lemoine:

The City of Makati is one of the cities and municipalities that make up Metro Manila, the major financial and commercial hub of the Philippines

This week, the Philippines reported a 2.5% growth rate for the first quarter, the best performance for its economy in two years.

Elsewhere, Indonesia (IDX, quote) continues to outperform, growing 6.3% in the first quarter. Thailand (THD, quote), on the back of substantial government outlays in an attempt to rehabilitate the country after last year’s devastating floods, is also outpacing developed world counterparts.

The stellar performance of these Southeast Asian economies comes as something of a surprise considering how heavily dependent on exports most of them are. However, increased domestic demand has helped mitigate the slowdown in exports.

Even economies like Singapore (EWS, quote) and Malaysia (EWM, quote), whose economies are highly reliant on the export sector, look likely to continue to report surpluses in the near future. The underlying fiscal health of these countries should also allow their central banks more policy flexibility in the event of a prolonged global slowdown.

The relatively strong economic fundamentals in the region have led to a boom in foreign direct investment, with Indonesia’s FDI surging 30% last year.

Investors looking for emerging market exposure may want to focus on some of the aforementioned Southeast Asian economies, and in particular Indonesia. However if the euro zone crisis were to morph into calamity, even these countries are unlikely to continue to expand at such impressive rates. 

On the other hand, positive news from Europe – when it comes – will send the ETFs of these nations much higher.


Leave a Reply