Emerging Asian economies expected to post slower growth next year

MANILA, Philippines — Growth in Emerging Asian economies, the Philippines included, is expected to be subdued next year because of the combination of tighter monetary policy across the region and weaker global demand, according to London-based Capital Economics.

Based on third quarter data reported by major economies in Emerging Asia, the macroeconomic research firm estimates that growth has fallen from 4.3 percent year-on-year in the second quarter to 3.7 percent in the third quarter, the lowest in two years.

“Growth in year-on-year terms slowed in all of the eight countries that have reported third quarter figures – the first time this has occurred since the 2008-2009 global financial crisis. The sharpest slowdowns were in Singapore, Thailand and Taiwan, with growth holding up relatively well in Indonesia, the Philippines and Malaysia,” the firm said in a recent economic update for the region.

“Overall, we expect growth to remain fairly subdued over the coming quarters,” it said.

Capital Economics attributed the slowdown to a decline in export growth, which slowed in seven of the eight countries.

“We think that a rebound in growth is unlikely over the coming quarters. On the plus side, fiscal policy should remain supportive throughout most of the region. The Philippines, Thailand and Taiwan all have ambitious infrastructure projects in the pipeline, while Singapore and Korea both have expansionary budgets planned for next year,” the firm said.

Tighter monetary policy in some countries like Indonesia and the Philippines may also weigh down on growth prospects, it said.

“Indonesia and the Philippines have hiked rates aggressively this year, and we think Indonesia’s tightening cycle has a little further to run. Meanwhile, Hong Kong and Singapore will face higher interest rates if the US Fed continues to raise rates, as we expect,” the firm said.

In an earlier report on the Philippines, Capital Economics said it expects the Bangko Sentral ng Pilipinas (BSP) to take a break from rate hikes as inflation is set to fall back over the coming months.

It said that while headline inflation remained unchanged at a nine-year high of 6.7 percent in October, it should fall steadily in the next months because of moderating food prices and decline in global oil prices.

The policy-setting Monetary Board decided to raise its policy rate from 4.50 percent to 4.75 percent, resulting in a cumulative rate hike of 175 basis points since May.

Capital Economics said that while the BSP is still concerned about elevated inflation expectations, it is also mindful about economic growth projections.

“The BSP will also be concerned about pressing the brakes too hard given the worsening outlook for economic growth,” it said in the earlier report.

Philippine economic growth slowed to 6.1 percent in the third quarter as high inflation eroded consumer spending.