Asean-4 to lag regional rebound; more easing on the cards in Indonesia: reports

SOME key Asean states are expected to underperform regional growth this year, with analysts citing local Covid-19 outbreaks as hurdles to economic recovery.

Nomura watchers have tipped the Asean-4 economies of Indonesia, Malaysia, the Philippines and Thailand to lag behind China, India, South Korea and Singapore in the rebound from a pandemic-induced downturn.

Among the regional winners, Nomura said that Singapore could benefit from the vaccination boost to biomedical production, as well as its tech-sector exposure, while South Korea is going through an export and investment-driven upcycle.

But "Covid-19 cases are still rising or remain elevated in a few economies (Korea, Indonesia and Thailand), reinforcing our view that the growth path until there is a wider vaccine distribution will be bumpy and divergent", analysts wrote in a report on Jan 8.

Nomura has cut its forecast for Thailand to 2.8 per cent, from 3.2 per cent before, "as rising local virus transmission will further dent the fragile recovery".

Besides the virus epidemic, the rebound in the Thai economy could also be hampered by political uncertainty, a strong baht and slow recovery in the powerhouse tourism sector, the analysts noted.

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The house was also bearish on "uncertain vaccine procurement plans and limited fiscal support" in the Philippines, and the time needed for an inoculation roll-out in Indonesia.

It added that Indonesia, which has South-east Asia's largest population and highest case numbers, will need more fiscal support and monetary easing in the near term.

Meanwhile, DBS economist Radhika Rao has not changed her economic outlook on Indonesia, but said that the central bank could ease policy amid the virus impact.

Recent gains in commodity prices are positive for revenues and trade, yet pose a downside risk to inflation, she noted in a report on Monday.

"On the growth front, a rise in virus cases might see the authorities consider intermittent localised restrictions in the coming weeks subject to the pandemic curve, as growth momentum gets a weaker handover into 2021," Ms Rao added.

"Normalisation in activity is likely to be more gradual and incremental, assuming a sharp rise in cases does not trigger broader restrictions."

She has pegged Indonesia's gross domestic product growth at 4 per cent in 2021.