asean+3 regional economic outlook 2021 update

Hoe Ee Khor

Chief Economist

AREO 2021 Update

ASEAN+3 Regional Economic Outlook 2021 – Update

Recovering from Covid-19: Transitioning Smoothly From Pandemic to Endemic New Normal

October 7, 2021

Covid infections have declined in recent weeks

1Sources: Johns Hopkins University via Haver Analytics; and AMRO staff calculations.

ASEAN+3: Daily New Cases(7-day average; thousands of cases)

0

20

40

60

80

100

120

21-Jan-20 29-Mar-20 5-Jun-20 12-Aug-20 19-Oct-20 26-Dec-20 4-Mar-21 11-May-21 18-Jul-21 24-Sep-21

Japan

Malaysia

Philippines

Vietnam

Lao PDRBrunei Darussalam

Indonesia

Korea

Myanmar

Thailand

Cambodia

Singapore

Not visible:

Hong Kong, China

AMRO’s Covid Cycle shows an improving trend globally

2Notes: Data as of September 30, 2021. Minor outbreaks are classified as outbreaks in the bottom 75th percentile of a country’s 7-day average daily new cases or outbreaks with less than 15 daily new cases in a country’s 7-day average. Outbreaks can retroactively be reclassified as non-minor if a later date breaches the 75th percentile or 15-daily cases threshold.

ASEAN+3 and Selected Economies: Covid Cycle Heatmap(7-day average)

Sources: Haver Analytics, sourced from Johns Hopkins University; AMRO staff calculations.

First First-mid Mid Late End Reappearance/Minor outbreak

China 29

Hong Kong, China 5

Japan 1,365

Korea 2,216

Indonesia 1,543

Malaysia 14,358

Philippines 16,169

Singapore 2,397

Thailand 10,777

Brunei Darussalam 172.0

Cambodia 507

Lao PDR 440

Myanmar 1,478

Vietnam 6,844

Australia 2,127

Brazil 16,022

France 4,359

Germany 7,986

India 19,589

United Kingdom 38,657

United States 104,749

DECSEP JANNOV FEB MAR APR MAY JUN JUL AUG SEP

20212020

AUGJULJUN OCTJAN FEB MAR APR MAY

Daily new cases

(7-day average)

Vaccination rates are rising strongly

Selected Economies: Total Vaccines Administered

(Per 100 population)

Note: Data as of September 29, 2021.

Sources: Our World in Data via Haver Analytics; and AMRO staff calculations.

0 20 40 60 80

Vietnam

Myanmar

Indonesia

Philippines

Thailand

Lao PDR

Brunei Darussalam

Korea

Hong Kong, China

Japan

China

Malaysia

Cambodia

Singapore

AREO 2021 Current

Selected Economies and ASEAN+3: Fully Vaccinated Population(Percent of population)

0

40

80

120

160

1-Dec-20 11-Mar-21 19-Jun-21 27-Sep-21

Myanmar

Japan

Singapore

Malaysia

China

Cambodia

World

KoreaHong Kong

Philippines

Sources: Our World in Data via Haver Analytics; and AMRO staff calculations.

Brunei

Thailand

Indonesia

Vietnam

Lao PDR

3

Source: AMRO staff estimates.

Lo

w

Med

ium

Hig

h

Short Term (up to 2 years) Medium Term (2 to 5 years) Long Term (> 5 years)

Legend: Low impact Medium impact High impact

Sudden and

sharper-than-

expected Fed

tightening

Likelihood

Imminence

Sovereign

debt crisis

due to the

pandemic

Perennial Risks

Climate change

Natural

disasters

Cyber attacks

Geopolitics

Financial

crisis due to

the

pandemic

Financial

distress

among

businesses/

households

Global Risk Map (GRiM)

October 2021 (AREO 2021 Update)

Repeated

waves of

the

pandemic

Elevated trade

and tech

tensions

However, the pandemic still poses downside risks

4

Economic recovery remains uneven

Source: IHS Markit.

Note: The PMI headings are coded by colors. The deeper the red the further below (< 40) from the diffusion level of 50; greener denotes the further above (> 60) from 50. A PMI reading above 50 denotes an increase in business activity over previous month, and a reading below 50 denotes otherwise.

Manufacturing PMI(Seasonally adjusted; diffusion index)

5

Economy Change from

Prev Month

Global 0.0

Developed Markets -1.2

United States -0.3

United Kingdom -3.2

Eurozone -2.8

Emerging Markets 1.2

PLUS-3 0.1

China 0.7

Hong Kong* -1.6

Japan -1.2

Korea 1.3

ASEAN 5.5

Indonesia 8.5

Malaysia 4.7

Philippines 4.5

Singapore* 1.6

Thailand 0.6

Myanmar 4.6

Vietnam 0.0

2021

Jan to SepJan to Dec

20202019

Jan to Dec

Improvement in goods exports have outpaced services

ASEAN+3: Goods and Services Exports(Percent year-over-year; 3-month moving average)

Sources: National authorities via Haver Analytics; and AMRO staff calculations.

Selected ASEAN+3: Aggregate Tourist Arrivals (Millions of persons)

-20

-10

0

10

20

30

40

50

2018 2019 2020 2021

Goods (volume) Goods (USD)Services (USD, RHS)

-40

-20

0

20

40

60

80

100


Note: Data include Cambodia, Hong Kong, Indonesia, Japan, Korea, Singapore, Thailand, and Vietnam.

0

5

10

15

20

Jan-18 Aug-18 Mar-19 Oct-19 May-20 Dec-20 Aug-21

100

150

200

250

300

350

400

Apr-20 Dec-20 Aug-21

Labor market conditions and corporate balance sheets have not yet recovered

Appreciation

0

2

4

6

8

10

Thailand Vietnam Japan Malaysia Korea Hong Kong Philippines

Pre-pandemic Pandemic peak Latest available

15.4

Unemployment Rate(Percent, seasonally-adjusted)


Note: Pre-pandemic data refers to January 2020 for Japan, Korea, Hong Kong and Malaysia; and Q4-2019 for the Philippines and Vietnam. Pandemic peak refers to the maximum unemployment rate between February 2020 and March 2021. Latest data refers to July 2021 for Hong Kong and Korea; June 2021 for Japan and Malaysia; Q1-2021 for Thailand; and Q2-2021 for the Philippines and Vietnam.

7

0

10

20

30

40

70

201

9

202

0

202

1

201

9

202

0

202

1

201

9

202

0

202

1

201

9

202

0

202

1

201

9

202

0

202

1

201

9

202

0

202

1

201

9

202

0

202

1

201

9

202

0

202

1

201

9

202

0

202

1

201

9

202

0

202

1

CN HK ID JP KR MY PH SG TH VN

ST Debt LT Debt

Selected ASEAN+3: Debt‒at‒Risk of Listed Firms(Percent of GDP)

Sources: Bloomberg L.P.; national authorities via Haver Analytics; and Ho and Ong (forthcoming).

Note: The Debt-at-Risk ratios for 2021 are projected using actual data on the first half of 2021.

Sources: Sources:

Equity and debt flows remain volatile

Bloomberg Finance L.P. and AMRO staff calculations. National authorities via Haver Analytics; and AMRO staff calculations.

ASEAN-4 and Vietnam: Net Foreign Portfolio Capital Flows

(Billions of US dollars, as of September 30, 2021)

Equities Bonds

-2

-1

0

1

2

03-Jan-20 17-Apr-20 31-Jul-20 13-Nov-20 26-Feb-21 11-Jun-21 24-Sep-21

Indonesia Malaysia Philippines Thailand Vietnam

8

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21

Indonesia Malaysia Thailand

Note: Flows data for Malaysia and Thailand for the month of September 2021 are unavailable.

Diverging trends in equity, bond and foreign exchange markets

Note: Figures in parentheses refer to returns since December 31, 2019. ASEAN-5 (average) is simple mean of returns since December 31, 2019 in benchmark equity indices of Indonesia, Philippines, Malaysia, Thailand and Singapore. Data as of September 30, 2021.

Note: Figures in parentheses refer to changes in 10-year government bond yields since December 31, 2019 in basis points (bp). ASEAN-5 (average) is the simple mean of changes since December 31, 2019 in 10-year government bond yields of Indonesia, Philippines, Malaysia, Thailand and Singapore in bp. Data as of September 30, 2021.

Sources: Bloomberg Finance L.P.

Note: Data as of September 30, 2021.

Feb-21

9

-45

-30

-15

0

15

30

45

60


CN (15.9) HK (-12.5)

KR (39.3) ASEAN-5 (average*)

-200

-150

-100

-50

0

50

100


CN (-27.7bp) HK (-53bp)

KR (53bp) ASEAN-5 (average*)

Selected ASEAN+3: Equity Market Indices

(Index, January 1, 2020 = 100)

Selected ASEAN+3: 10-year Government Bond Yields

(Basis point change)

Sources: Bloomberg Finance L.P. and AMRO staff calculations. Sources: Bloomberg Finance L.P. and AMRO staff calculations.

-20

-15

-10

-5

0

5

10

Jan 2020 Jun 2020 Nov 2020 Apr 2021 Sep 2021

Japan China Hong KongKorea Indonesia PhilippinesMalaysia Thailand Singapore

Appreciation

Selected ASEAN+3 Currencies against USD

(Percentage change from Dec 31, 2019)

Some economies are better placed to withdraw policy support

ASEAN+3: Vulnerability to Exit Risks, as of September 2021


Note: Ratings are assigned as follows: (1) red – weaker; (2) orange – less weak; (3) yellow – less strong; (4) green – stronger. The overall vulnerability rating is a simple average of the individual

ratings. “Healthcare capacity” refers to the availability of hospital beds and the quality of healthcare, the latter of which draws on AMRO staff judgment; “Size of domestic market” refers to the

economy’s import-adjusted GDP; “Economic diversity” refers to the relative size of key economic sectors (e.g., agriculture, manufacturing, services), overlaid by AMRO staff judgment about the

diversity of industries within each sector; “Remaining policy space” is based on the methodology presented in Poonpatpibul and others (2020); “Degree of policy support” is based on the extent of

actual policy support provided since the start of the pandemic assessed by AMRO staff; “Recovery rate” is proxied by AMRO staff’s projections of the output gap as of end-2021; “External buffers”

are the reserve coverage indicator based on the ERPD Matrix Scorecard percentile. BN = Brunei Darussalam; CN = China; HK = Hong Kong; ID = Indonesia; JP = Japan; KH = Cambodia; KR =

Korea; LA = Lao PDR; MY = Malaysia; MM = Myanmar; PH = Philippines; SG = Singapore; TH = Thailand; and VN = Vietnam.10

ASEAN+3 to grow by 6.1% in 2021 and 5.0% in 2022

Economy

Gross Domestic Product

(year-over-year)

Consumer Price Index

(year-over-year)

2020

(Actual)

AREO 2021

(March 2021)

AREO 2021 Update

(October 2021) 2020

(Actual)

AREO 2021

(March 2021)

AREO 2021 Update

(October 2021)

2021p 2022p 2021p 2022p 2021p 2022p 2021p 2022p

ASEAN+3 0.0 6.7 4.9 6.1 5.0 1.8 2.2 2.3 2.4 2.9

Plus-3 0.9 7.2 4.7 6.9 4.8 0.8 1.1 1.4 1.1 1.6

China 2.3 8.7 5.5 8.2 5.5 2.5 1.5 2.0 1.3 2.0

Hong Kong, China ‒6.1 4.8 6.5 6.5 4.0 0.3 2.0 2.0 1.7 2.0

Japan ‒4.6 2.7 1.8 2.6 2.4 0.0 ‒0.1 0.3 ‒0.5 0.4

Korea ‒0.9 3.2 3.0 3.9 3.0 0.5 1.0 1.3 1.9 1.9

ASEAN ‒3.3 4.9 5.7 2.7 5.8 2.1 2.6 2.6 3.0 3.5

Brunei Darussalam 1.1 3.1 4.0 2.1 3.2 1.9 1.2 1.0 1.6 1.0

Cambodia ‒3.1 4.7 6.1 2.8 6.6 2.9 3.5 2.4 3.3 2.3

Indonesia ‒2.1 4.9 5.3 3.8 5.6 2.0 2.5 3.0 1.6 2.7

Lao PDR 3.3 4.6 4.8 2.9 5.0 5.1 3.5 4.0 4.0 5.2

Malaysia ‒5.6 5.6 6.2 4.1 6.7 ‒1.1 2.0 2.2 2.5 2.2

Myanmar 3.2 ‒2.6 4.5 ‒18.7 0.0 5.8 5.0 5.5 6.7 12.4

The Philippines ‒9.6 6.9 7.8 4.3 6.7 2.6 3.8 3.3 4.3 3.2

Singapore ‒5.4 6.0 4.7 6.3 4.0 ‒0.2 0.5 0.7 1.6 1.3

Thailand ‒6.1 2.3 4.8 0.8 5.8 ‒0.8 0.8 0.9 0.8 1.0

Vietnam 2.9 7.0 6.8 2.6 7.5 3.2 3.2 3.2 3.2 3.2

ASEAN+3: AMRO Growth and Inflation Projections, 2021–22


Note: AREO = ASEAN+3 Regional Economic Outlook report. p = projections. Regional aggregates for growth are estimated using the weighted average of 2020 GDP on purchasing power parity basis; regional

aggregates for inflation are computed using simple averaging.

11

• COVID-19 pandemic is receding across the region toward becoming endemic

• Rapid vaccinations and targeted containment measures should allow countries to open up safely in the endemic new normal

• Policy support should be phased out in a gradual and well-communicated manner to avoid cliff effects

• Targeted policy measures should continue to support the hard hit sectors, minimize scarring effects, and facilitate the transition to the new digital economy

• ASEAN+3 economies are gaining recovery momentum and are expected to grow strongly next year

Key messages

12

Thank you

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asean+3 regional economic outlook 2021 update

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