Moderate Q3 growth seen for Asean+3 economies

MANILA, Philippines — Economic growth is expected to moderate in the ASEAN+3 economies in the third quarter of the year on continuing uncertainties in global trade and renewed strength of the dollar, the ASEAN+3 Macroeconomic Research Office (AMRO) said in a report.

In the August update of its regional economic outlook, the regional macroeconomic surveillance organization noted China and Japan’s strong albeit slower year-on-year growth in the second quarter amid external uncertainties from trade tensions.

China posted a 6.7 percent growth in the second quarter, slower than the 6.9 percent in the same quarter last year. Japan, meanwhile, posted a one percent growth in the second quarter, slower than the 1.6 percent last year.

ASEAN+3 groups the seven countries of the Association of Southeast Asian Nations with China, Hong Kong, Japan and Korea. The ASEAN countries are Brunei, Indonesia, Malaysia, Singapore, Thailand,

Vietnam and the Philippines.

AMRO said that in other economies in the region, recent readings of the purchasing managers’ index (PMI) suggest slower economic activity as of July, indicating softer growth in the third quarter.

It noted, however, that uncertainties on global trade continued to impact economies of other countries in the region.

“In other regional economies, monthly manufacturing PMI readings suggest slight softening of economic activities in July, potentially signaling a moderate growth outlook in Q3 2018. Despite the uncertainties in global trade, so far, it has not affected the region materially,” AMRO said in the report.

AMRO noted that uncertainties over the global trade outlook and renewed strength in the US dollar – that comes with growth in the US economy and faster-that-expected policy rate hikes by the Fed – would continue to post challenges for the region.

It noted, however, that policy settings in the region continue to be supportive of growth.

“The uncertainties over global trade outlook and the renewed dollar strength will continue to pose strong headwinds, with downward pressure on asset prices and capital flows. While policy settings in the region continues to be supportive of growth, the near term risks continued to be characterized by potential upside surprises in US wage growth/inflation triggering a faster-than-expected Fed rate hike,” said AMRO.

“The downside risks to emerging markets’ asset prices and capital flows could interact with further escalation of global trade tensions, which can be mutually reinforcing,” it added.

Based on preliminary estimates, the US economy grew 4.1 percent in the second quarter of the year, the fastest in three years, prompting expectation of stronger growth in the third quarter of the year. Core inflation, however, has been rising since early this year, reaching 2.4 percent in July.

Economic growth in the eurozone, meanwhile, slowed down in the second quarter to 2.1 percent “as trade uncertainties weighed on business sentiment.”