articles Ratings /ratings/en/research/articles/210819-pandemic-is-disrupting-2021-growth-outlooks-in-southeast-asia-12081091 content esgSubNav
In This List
NEWS

Pandemic Is Disrupting 2021 Growth Outlooks In Southeast Asia

COMMENTS

COVID-19 Impact: Key Takeaways From Our Articles

COMMENTS

Global Actions On Corporations, Sovereigns, International Public Finance, And Project Finance To Date In 2021

COMMENTS

Credit FAQ: How Has Dubai Fared Amid The COVID-19 Pandemic?

COMMENTS

How Will China's Evolving Economic Model And Energy Strategy Affect Trade With Central Asia?


Pandemic Is Disrupting 2021 Growth Outlooks In Southeast Asia

SINGAPORE (S&P Global Ratings) Aug. 19, 2021--Emerging Southeast Asian economies are facing intense headwinds from persistent COVID-19 pandemic waves, S&P Global Ratings said today. The duration and severity of the pandemic has been more adverse than our previous baseline expectations. As a result, we are revising downward our 2021 growth expectations for a number of emerging Southeast Asia economies.

Private consumption and services will be hit hardest by the pandemic. While the new lockdowns this year have been less costly as economies adapted to reduced mobility, the longer durations have meant that the economic costs are rising. Meanwhile, external demand will provide a buffer against further outlook deterioration. International trade remains strong due to healthy demand for goods as global economies open up.

"A fresh slump in demand in emerging Southeast Asia is hitting sectors that have already faced a challenging year," said Vishrut Rana, Asia-Pacific economist at S&P Global Ratings. "As the pandemic drags on, balance sheets will deteriorate for households, small and midsize enterprises, banks, and the wider economy, leading to more medium-run economic scarring."

Policy settings across the region are likely to remain steady. Central banks are wary of easing further. The U.S. Federal Reserve's next policy change is likely to be tapering of quantitative easing, and policy easing from the Southeast Asian central banks could increase capital outflows in the region. The central banks are already deploying a range of tools, including loan moratoriums and acquisition of public securities. Meanwhile, core inflation and broader inflationary pressures are subdued amid weakening domestic demand; so central banks are unlikely to tighten policy further.

New fiscal stimulus measures announced this year in Southeast Asian economies have been more limited in scope, given that the fiscal policy space was significantly eroded during the initial pandemic escalation in 2020. Overall public spending is still set to support growth during the year based on previously announced measures and government budgets for the year.

Forecast Revisions

We have revised our 2021 growth forecast for Thailand lower to 1.1%, from our June forecast of 2.8%. The current COVID-19 escalation in Thailand is the most severe so far, as the country had successfully limited the spread in 2020.

The escalation has led to reduced mobility, with tight lockdowns in place across 29 out of 77 provinces in August, and more moderate lockdowns in the rest of the country. Overall mobility was about 27% lower than normal in August, according to Google Community Mobility data, which will slow down domestic activity. In addition, the pandemic escalation has pushed back the likely timelines for greater normalization of domestic activity and a gradual resumption of tourism.

"The services and informal sectors in Thailand have been under strain from the absence of tourism," said Mr. Rana. "The additional strain from a pandemic-related drop in domestic demand will weaken these sectors further."

We lowered our 2021 growth forecast for the Philippines to 4.3% from 6.0% in June, and we forecast growth of 7.7% in 2022 compared with our earlier forecast of 7.5%. Intermittent lockdowns have been weighing on economic activity, and a fresh escalation driven by the COVID-19 delta variant has led authorities to re-impose more stringent lockdowns in a number of major cities.

"The combined hit to activity from floods in parts of the Philippines and fresh lockdowns to contain the pandemic has significantly eroded what would have been a highly favorable base effect for the country," said Vincent Conti, senior economist, Credit Markets Research, at S&P Global Ratings. "The longer downturn will cause even more economic scarring. By 2025, the Philippines' GDP will likely be 12% below where it would have been without the pandemic."

We lowered our growth forecast for Malaysia to 3.2% in 2021 from 4.1% earlier. Strong international trade is providing a sizable buffer for growth this year. However, domestic demand is looking much weaker. Lockdowns to manage the ongoing pandemic wave have now been in place for around three months. The deeper downturn has cut activity in the services sector and is resulting in sizable job-losses-–in June the unemployment rate jumped to 4.8% from 4.5% in May.

Malaysia now has a relatively high vaccination coverage, with about 52% of the population having received at least one dose. This will enable a gradual re-opening of the economy over the next several months.

Vietnam had largely managed to contain the pandemic until earlier this year, but cases escalated noticeably in July. Since then, tight lockdowns have been enforced across wide parts of the country to contain the spread of COVID-19. The pandemic has disrupted manufacturing supply chains in the country as various factories have had to cut production and capacity. Overall, we forecast growth of 4.8% in 2021, down from our June projection of 7.3%.

Revised GDP Growth Forecasts
GDP growth (% year-on-year) Change from June
2020 2021 2022 2023 2024 2021 2022
Malaysia (5.6) 3.2 6.0 5.2 4.6 (0.9) (0.3)
Philippines (9.6) 4.3 7.7 7.4 7.3 (1.7) 0.2
Vietnam 2.9 4.8 7.9 7.1 6.8 (2.5) 0.4
Thailand (6.1) 1.1 4.2 5.1 2.9 (1.7) (0.7)

RELATED RESEARCH

This report does not constitute a rating action.

S&P Global Ratings, part of S&P Global Inc. (NYSE: SPGI), is the world's leading provider of independent credit risk research. We publish more than a million credit ratings on debt issued by sovereign, municipal, corporate and financial sector entities. With over 1,400 credit analysts in 26 countries, and more than 150 years' experience of assessing credit risk, we offer a unique combination of global coverage and local insight. Our research and opinions about relative credit risk provide market participants with information that helps to support the growth of transparent, liquid debt markets worldwide.

Asia-Pacific Economist: Vishrut Rana, Singapore + 65 6216 1008;
vishrut.rana@spglobal.com
Senior Economist, Credit Markets Research: Vincent R Conti, Singapore + 65 6216 1188;
vincent.conti@spglobal.com
Media Contact: Richard J Noonan, Melbourne + 61 3 9631 2152;
richard.noonan@spglobal.com

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com.


Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back