Message from Secretary General_June 2021
Posted on 08 July 2021
Q1 2021 Macroeconomic Results
2021 is the year that many countries are looking forward to an economic recovery post COVID19.
In the effort to balance economic activity and pandemic controls, many ASEAN countries are facing another surge of infections and controls are being re-imposed in Malaysia, Thailand, Vietnam and Singapore. In contrast, cases in Philippines and Indonesia are on a downward trend.
ASEAN-6 GDP in Q1 2021
On the whole, ASEAN 6 economies are improving since the meltdown in Q2 2020.
Vietnam registered a 4.5% GDP growth in Q1 2021, continuing its economic expansion through its early control over the pandemic.
Singapore’s economy grew an 1.3% in Q1 2021, being the only other ASEAN-6 countries to achieve a positive growth in Q1 2021, mainly due to expansion in the manufacturing, finance & insurance and wholesale trade sectors.
Indonesia recorded 4 quarters of economic contraction, with the Q1 2021 GDP declining 0.7%. The largest economic sectors such as industry, trade, construction, and mining all contracted, though their performance were better than previous 3 quarters.
Malaysia’s GDP marginally declined 0.5% in Q1 2021, mainly supported by the expansion in manufacturing sector and the rebound of agriculture sector.
Thailand’s GDP shrank 2.6% mainly due to contraction in the non-agriculture sectors. Q1 2021 GDP is much better than the past few quarters.
Philippines’s economy shrank 4.2% in Q1 2021, 5 straight quarters of decline marks the longest recession since the 1980s. Prolonged lockdowns, which is still ongoing, were cited as main reason for the contraction in almost all economic sectors.
ASEAN-6 Construction Sectors
Construction activities registered a 5.2% growth in Vietnam in Q1 2021, due to early control over the pandemic.
Thailand is the other ASEAN-6 country in which construction grew 12.7% in Q1 2021, due to increased disbursement for land and buildings items from the Ministry of Transport and Agriculture & Cooperatives as well as due to new infrastructure and residential projects by state owned enterprises; private construction activities declined across the board.
Indonesia’s construction activities contracted slightly at 0.8% in Q1 2021.
The Malaysian construction sector activities decreased by 10.4%, much better than the past 3 quarters, attributed to a slower decreased in residential buildings, non- residential buildings and civil engineering sectors.
Singapore’s construction sector shrank by 22.7% y-o-y in Q1 2021, due to further declines in public and private sector construction activities.
In spite of a huge decline in construction activity (-24.2% in Q1 2021), Philippines’ public construction spending expanded 26.2% during the same period as the country moves towards a recovery.
The construction sectors in ASEAN-6 are performing better in Q1 2021, but challenges continue as countries battle the resurgence of COVID19. Challenges continue to plague the construction sector due to the need to adhere to new SOP, lack of foreign manpower, liquidity issues from delayed payments / cancelled projects being the among the main reasons.
ASEAN-6 Manufacturing Activities
The ASEAN-6 manufacturing sectors have expanded with the exception of Indonesia and Philippines.
The Vietnam success story continues in the manufacturing sector, which grew 9.5% in Q1 2021. Within this sector, the following sub sectors were the best performers:
- Manufacture of basic metal up 30.9%
- Manufacture of electrical equipment up 12.5%
- Mining for metal ores increased 12.5%
- Manufacture of automobiles, trailers and semi-trailers rose 11.2%
In terms of industrial products, the production of most steel products was better in Q1 2021 vs Q1 2020:
- Laminated steel up 54%
- Crude steel increased 14.4%
- Steel bars and angle down 1.6%
The other 2 ASEAN countries saw continuing robust expansion in manufacturing activities are:
- Singapore (10.7% growth): Output expansions in the electronics, precision engineering and chemicals.
- Malaysia (7.3%): Growth in electrical and electronics and optical products sector (10.6%) and petroleum, chemicals, rubber and plastic products (7.3%).
Thailand’s manufacturing sector was up 0.7% in Q1 2021 mainly due to
- Raw materials production sub sector (up 0.6% for the production of basic metal, fabricated metal, chemical and chemical product, and paper and paper product)
- Capital and technology industry (up 4.7% due to increases in electrical equipment, machinery and equipment, computer and peripheral equipment, and motor vehicles)
Indonesia’s manufacturing sector is the largest economic sector and it declined 1.4% in Q1 2021, the best results in compared to the past 3 quarters, as the sector continues to improve.
As with the construction sector, the Philippines manufacturing sector continued to contract (4.7% in Q1 2021) due to prolonged lockdowns.
ASEAN-6 Government Forecasts for 2021
The ASEAN-6 governments have more or less maintained their target GDP growth for the year, except Thailand where the forecast has been reduced to 1.5- 2.5% due the recent third wave outbreak which is expected to hinder economic recovery.
Most of the other ASEAN-6 countries are projecting growth rates of 6.0 – 7.5% (Malaysia, Philippines, Vietnam). Indonesia’s GDP forecast was adjusted slightly to 4.5 – 5.3% and Singapore is expecting the 2021 GDO to be at the higher end of 4.0 – 6.0% growth.
The governments are investing billions into public infrastructure projects, which will continue to lift their economies towards recovery.
However, risks and challenges remain as the recent wave of COVID19 outbreak from the various new variants and slow rollout of vaccination programme threatens the pace of recovery in most ASEAN-6 countries.
With the external markets also facing similar circumstances, it will take a longer time to achieve global recovery to pre-pandemic levels. The only bright spot is that China economy is recovering fast and this is one opportunity that ASEAN-6 countries are well position to take advantage of.
Wear A Mask. Keep Your Distance. Stay Safe.
Yeoh Wee Jin
Source : SEAISI