Ten years after the Asian Financial Crisis, Southeast Asian economies have mostly recovered from the debilitating effects of the Asian financial crisis. The Philippines and Indonesia experienced good economic performance in 2006 with low inflation, healthy domestic and foreign investment and good macroeconomic management. Singapore and Malaysia, the relatively more developed ASEAN economies, had strong investment-driven growth and registered robust export growth in electronics and computer peripherals.
The overall outlook is positive but there remain risks to regional stability and economic growth. Particular risks to watch out for include cyclical headwinds in OECD countries and the risk that excessive liquidity now driving financial asset prices could correct suddenly and precipitate a major economic shock.
In spite of such risks, we believe the region is fundamentally on the mend as accumulating structural positives will offset near-term risks. In essence, this report argues that:
-Although lead indicators suggest some deceleration in the near term, the major economies of the world are poised to experience reasonable growth beyond that short-lived phase. Fast growth is to continue in China and India; Japan is holding up despite some recent weakness and Europe could well surprise positively.
-Southeast Asia has seen much restructuring which has made its economies more resilient against any global or regional downturns. Specifically, a new phase of growth is now likely over the longer term, driven by a higher investment-GDP ratio.