Global economy set up for a better 2017; Rising challenges in Myanmar – CAA Weekly

Key highlights from the CAA Weekly Table

  • Global economy: The US economy is strengthening smartly but the Fed could be caught behind the curve and be forced to hike rates faster than expected. This will cause abrupt capital outflows from Asian emerging markets, resulting in destabilising swings in currencies.
  • Asian economies: Intensifying inflationary pressures in China will have spillovers into the world economy; Singapore could be the potential beneficiary of a export-led cyclical upturn even though structural issues still need to be resolved.
  • US-China relations are at risk, as President-elect Trump lashed out at China again, questioning the need for the US to recognise the “One China” policy. This could stretch China’s initial even-handed approach to the US and compel it to consolidate its clout in East Asia further.

Rising import intensity sets global economy up for a better 2017

  • The stop-start nature of the recovery in the global economy has resulted in desultory growth in world trade. However, as major economies embark on more resilient growth trajectories, import demand has embarked on an incipient turnaround.
  • There are two reasons why we think this nascent upturn can be sustained. First, core capital goods orders are gradually gaining momentum and should garner pace as the US economy strengthens further. Second, US new orders for computer and electronic parts – a lead indicator for Asian manufactured exports – picking up pace after a number of months of deceleration.
  • If this upturn in import growth persists, a corresponding increase in demand for Asian exports could provide an upside surprise to expectations for growth, especially in places like Singapore, Malaysia, Thailand, South Korea and Taiwan.

Myanmar: Rising challenges but limited capacity to respond

  • Barely eight months after taking power, ASSK’s government is facing growing challenges on both political and economic fronts. These challenges reflect deeply entrenched weaknesses in the system which cannot be easily resolved.
  • On the economic front, the lack of specific details in policymaking has resulted in businessmen delaying long-term investment decisions while inflation is also rising. Political and social challenges have also grown – the plight of the Rohingya Muslims has drawn international scrutiny and compromised Myanmar’s relations with its ASEAN neighbours while sullying ASSK’s reputation for upholding human rights and democracy.
  • ASSK needs to a more effective economic policy framework to buttress confidence while cutting a deal with the still all-powerful military to smooth out security issues.

For Complete CAA Asian Insights, Please Register here. 

12-Dec-2016


Leave a Reply