Threats that dampen growth
The new wave of protectionism and risks to Asean growth from slowing credit growth in China will pose threats for economies such as Singapore, a report from the Institute of Chartered Accountants in England and Wales (ICAEW) said yesterday.
The report suggests Singapore's overall gross domestic product growth is expected to come in at 1.4 per cent this year and 2 per cent next year, before accelerating to 3.5 per cent in 2018 as global trade improves.
This comes as trade pacts such as the Trans-Pacific Partnership (TPP) look dead in the water, with incoming US president Donald Trump rejecting the deal. Singapore is a TPP signatory.
Asean economies are also vulnerable to a slowdown in globalisation or "an erosion of the broad consensus" in favour of free trade, the report said.
It noted that many economies in the region such as Indonesia have succeeded in moving up the global value chain as a result of the opportunities presented by free trade and investment flows.
Mr Mark Billington, regional director, ICAEW South-east Asia, said: "Deals like the TPP are important not only for their potential to directly boost trade and investment flows, but also to help embed good business practice in signatory countries.
"If momentum towards deals' ratification seems to be slowing, governments and businesses should look at alternative measures to improve business environments."
Another key external risk to Asean growth in the next couple of years is the potential for a slowdown in credit growth in China. This would not only weaken global demand for raw materials - key exports for Indonesia and Malaysia - but would also hurt Singapore's activity as a transport and logistics hub.
Internally, Singapore has structural challenges to deal with, chiefly in the area of waning competitiveness among some key manufacturing sectors. This will continue to dampen growth over the coming years, ICAEW said.
"The adjustment in property prices is also a risk worth monitoring - banks look well capitalised and there seems little chance of a financial crisis, but a prolonged spell of falling property prices could slow growth which will impact household wealth," said Ms Priyanka Kishore, ICAEW economic adviser and Oxford Economics lead economist.