ASEAN countries ‘decoupling’ from US economy

ASEAN economies, including Malaysia, are experiencing a “partial decoupling’’ from the United States, the world’s largest economy, according to a new study.

Maybank IBG Research latest report explains how ASEAN countries – which has 10 member countries, including Indonesia, Thailand, the Philippines and Singapore – are becoming less exposed to the US economic downturn and potential recession.

The report found that the cumulative gross domestic product (GDP) of Malaysia, Thailand, Indonesia and the Philippines is expected grow by 5.3% in the second half of 2022 and 4.9% in 2023, despite slowing US and global growth.

Maybank IBG Research also said that the probability of a US recession over the next 12 months has risen to 26%, based on the three-month and 10-year bond term spread.

“The US recession is likely to be shallow rather than deep, cushioned by labour shortages in reopening sectors and healthier household and corporate balance sheets,” it added.

It said that, traditionally, GDP growth in Malaysia, Singapore and Thailand has reflected US business cycles because exports are a big part of their economies.

Maybank IBG Research said: “Vietnam did not slip into recession in past US recessions, but the correlation and dependence on US value-added have risen over the past decade.

“Singapore remains the most vulnerable to a US recession, although the reopening tailwinds, recovery in foreign employment; relocation of headquarters, talent and capital inflows from Hong Kong and China, and available fiscal support are mitigating factors,” it said.

ASEAN economies have been more resilient than those of the United States, the European Union (EU) and China in the first half of 2022. The cumulative GDP growth of Malaysia, Thailand, Indonesia and the Philippines grew 5.4% in the first six months of 2022, beating the United States (2.6%) and the EU (4.7%).

In addition, Maybank IBG Research said that the strengthening intra-ASEAN trade will partly offset weaker trade with China, the US, Japan and the eurozone.

Rising energy and food prices are also helping ASEAN countries’ economies, with the report saying: “Elevated energy (Malaysia, Indonesia) and food prices (Thailand, Malaysia, Indonesia) are supporting some ASEAN commodity exports.”

Maybank IBG Research also said that the decoupling is happening because of the “reopening boost” that is still taking place in ASEAN countries. It said that accommodation and food services, construction and air transport industries remain below pre-pandemic levels, and these sectors will continue to recover as reopening gathers pace.

The research group also pointed to fiscal policies adopted by the member states: “Monetary policy tightening in most of ASEAN – except Singapore and the Philippines – has not been as aggressive as other emerging markets.

“Core inflation – which excludes energy and food prices – has not risen as sharply which has allowed the ASEAN central banks to be more measured in their interest rate hikes,” it stated.

The ASEAN member countries are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

 

Malaysia to host the Global Islamic Finance Forum 2022

The biennial Global Islamic Finance Forum 2022 (GIFF 2022) is set to take place in Kuala Lumpur on 5 and 6 October.

Themed ‘Take the Reins’, the forum “will bring together the best minds, leaders and innovators of the industry to address issues, opportunities and imperatives required to bolster global leadership in Islamic finance”, according to the organisers, the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM).

“Panelists will offer a shariah take on metaverse assets; cryptocurrency; sustainability and technology; women leaders in Islamic finance; as well as emerging halal investment opportunities,” said AIBIM in a statement.

Key speakers include World Bank senior financial specialist Fredes Montes; Oliver Wyman partner Dan Jones; Monzo general manager Jordan Shwide; Innate Capital Partners chair/United Nations advisor on Islamic Finance Aamir Rehman; and mmob chief executive Irfan Khan.

According to the association, BNM Governor Nor Shamsiah Mohd Yunus will deliver a keynote address at the forum.

“The challenges from the pandemic over the last couple of years have brought about vast changes. This is observed through the rise of Islamic consumption power which has transformed the global consumer landscape,” said GIFF2022 chairman Arsalaan Ahmed.

“The Islamic economy is now a crucial part of national recovery policies in more countries. In addition, the pandemic has accelerated digitalisation to promote financial inclusion.”

Malaysia is a global leader in Islamic finance and is ranked first among 81 countries for the ninth consecutive year in the Global Islamic Economy Indicator.

The Global Islamic Finance Forum 2022 is organised by the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM), in partnership with Bank Negara Malaysia (BNM). Register at www.giff-aibim.com.