Asean growth tracker indicates weak start to Q3: Oxford Economics

THE opening month of Q3 has been a slow one for Asean-6 economies and is a likely indicator of its performance in the near term, as tight restrictions weigh on activity.

The tracker, which includes Indonesia, Malaysia, the Philippines, Thailand, Singapore and Vietnam, saw growth slow to 6.5 per cent year on year in July, from 8 per cent year on year in June.

The waning base effect partly explains the downtick of the Asean-6 growth tracker in July, said Oxford Economics senior economist Sung Eun Jung, adding that the expectation is for the tracker's year-on-year growth to continue to trend downward in August, bringing it close to their Q3 growth forecast of 2.7 per cent year on year.

A surge in Covid-19 cases in the region has led to renewed anxiety and tighter government-imposed restrictions from June. The curbs were either tightened or extended into August for most Asean-6 economies, with daily infections rising rapidly in Malaysia, the Philippines, and Vietnam.

"We expect activity will decline further. Mobility restrictions were tightened in Vietnam and the Philippines, while Indonesia and Thailand extended their lockdowns in high-risk areas into August. Malaysia is relaxing measures, though it has not yet managed to contain the recent Covid outbreak. Singapore is also easing restrictions, but only at a gradual pace," noted Ms Sung in her report.

She added that low vaccination coverage in most Asean economies continues to complicate their pandemic containment strategy; Singapore is the outperformer with 80 per cent of the population fully vaccinated.

"We expect most Asean-6 economies to vaccinate 80 per cent of their populations by mid-2022, with Vietnam reaching this threshold by September next year. But we note that the level of immunity needed to avoid a sharp rise in hospitalisations and end the pandemic is still uncertain."

While there is a possibility that the Q3 growth forecast will need to be adjusted upward, Ms Sung maintained that the downside risks still outweigh the upside risks.

"We have also cut our near-term global growth forecast due to the rapid spread of the Delta variant. If new virus variants result in another global lockdown, we expect Asean's growth recovery will be further delayed to 2023 from 2022."