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Regional Economic Trends

from ECONOMIC OUTLOOK

Published online by Cambridge University Press:  21 October 2015

Denis Hew
Affiliation:
Institute of Southeast Asian Studies
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Summary

Southeast Asia will grow slower in 2005 — at 5 per cent compared with 6.3 per cent observed in the previous year (ADB 2005). The slowdown in the major industrial countries has been a drag on the global economy and high oil prices will continue to be a matter of concern over the coming year.

Global economic growth will decelerate to 4.3 per cent in 2005 compared with a historical high of 5.1 per cent in 2004 (IMF 2005) (Figure 1). World trade volume (goods and services) growth will soften from 10.3 to 7 per cent over the same period. It is evident that high oil prices and the downturn in the information technology (IT) sector have clearly taken their toll on industrial production and world trade in 2005.

Most countries in Southeast Asia will register lower growth rates in gross domestic product (GDP) in 2005 (Figures 2 and 3). The IT slump has affected the export performance of Singapore, Malaysia, the Philippines, and Thailand. On the supply side, bad weather conditions during the year have badly affected agricultural output in the Philippines and Thailand.

Continued high oil prices have clearly dampened economic growth in the region. Oil-dependent countries such as Singapore, Thailand, and the Philippines were particularly vulnerable. Indonesia also fared badly as its huge fuel subsidies were causing a severe downward pressure on the rupiah. Nevertheless, the country's currency has begun to stabilize, with significant hikes in domestic gasoline and diesel prices imposed by the Indonesian government.

Inflows of foreign direct investment (FDI) to China rose from US$53.5 billion in 2003 to US$60.6 billion in 2004, making it the world's third largest destination for FDI after the United States and the United Kingdom (UNCTAD 2005). Meanwhile, Southeast Asia saw a significant rise in FDI inflows, from US$17.4 billion in 2003 to US$25.7 billion in 2004 (Figure 4). The main beneficiaries of the higher inflows were Singapore, Malaysia, Indonesia, Myanmar, Vietnam, Cambodia, and the Philippines.

Type
Chapter
Information
Regional Outlook
Southeast Asia 2006-2007
, pp. 65 - 84
Publisher: ISEAS–Yusof Ishak Institute
Print publication year: 2006

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