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  • Southeast Asian Economies in 2010The Challenge of Sustaining Growth after the Recovery
  • Thiam Hee Ng (bio)

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The Southeast Asian economies staged a dramatic recovery in 2010 following the global financial crisis that swept through the region in 2008–09. The strength of the recovery underscores the region’s resilience. With the recovery safely under way, the focus in the region has now shifted towards sustaining growth in the post-recovery era.

The regional recovery in 2010 can be roughly divided into two halves. The first half was characterized by a rapid rebound in several economies as inventory restocking, fiscal and monetary stimulus measures, and the general recovery in the global economy fuelled growth. By mid-2010, these stimulus measures and restocking activities abated. In the latter part of 2010, growth in the region began to moderate as the effects of restocking waned and the fiscal and monetary stance normalized. In addition, a growing sense of pessimism about the continued recovery of the global economy affected the region. This moderation in growth is expected to continue through 2011 as the regional economies move into their post-recovery phase.

Rapid Recovery in Southeast Asia in 2010

As the region entered 2010, hopes were high that the recovery that started in the fourth quarter of 2009 would continue. Predictions of recovery were realized as several regional economies posted double-digit growth rates in the first half of 2010. Singapore’s stellar 18.2 per cent growth in the first half of 2010, in particular, [End Page 3] stood out (Table 1). The strong regional growth performance was driven almost entirely by domestic demand with investment soaring and consumption picking up (Figure 1). Consumer confidence precipitated the upward trend in consumption spending as the fears of financial meltdown waned (Figure 2). Meanwhile, most of the high rate of investment growth was due to inventory restocking. During the uncertain economic environment of the global financial crisis in 2008–09 many firms retrenched stock orders. As a result of frozen inventories during this period, firms entered 2010 with dwindling inventories. When business confidence gradually returned, firms started ordering again and rebuilding their inventories.


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Table 1.

Southeast Asia GDP Growth (%)


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Figure 1.

Southeast Asia: Contributions to GDP Growth (y-o-y %)

Notes: Southeast Asia = Indonesia, Malaysia, Philippines, Singapore, and Thailand; y-o-y = year-on-year.

Source: OREI staff calculations based on CEIC data.

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Figure 2.

Consumer Confidence Indexes (January 2007 = 100)

Notes: For Malaysia and Philippines data are quarterly.

Source: Bank Indonesia (Indonesia); Malaysia Institute of Economic Research (Malaysia); Bangko Sentral ng Pilipinas (Philippines); and the University of the Thai Chamber of Commerce (Thailand).

Singapore posted the fastest growth in the region in the first half of 2010, growing by a stunning 18.2 per cent driven by the strong performance of its manufacturing sector. Malaysia and Thailand also demonstrated impressive growth, with 9.4 per cent and 10.7 per cent growth rates, respectively. With their strong outward orientation and supportive trade environment, these three economies benefited from the strong rebound in global trade (Figure 3). Impressive as these growth rates appear, these economies had also suffered bigger slowdowns in the first half of 2009 than others. As a result, the comebacks were much more dramatic due to the deep drops and low base amid the crisis.

Meanwhile, Indonesia and the Philippines recorded weaker, but still very impressive, growth in the first half of 2010, growing by 5.9 per cent and 8 per cent, respectively. Both these countries are less open to trade and more dependent on domestic demand, which led to a dampened impact from the slowdown in 2009 and a much less dramatic resurgence during the upturn in the global economy in 2010. Growth in these two countries was driven mostly by consumption and investment, with the Philippines economy receiving a boost from election-related government spending and investment.

As the region’s economies entered the second half of 2010, the rapid pace of growth moderated. The...

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