JCER/Nikkei Consensus Survey on Asian Economies JCER/Nikkei Consensus Survey on Asian Economies July 2016 Survey Date: June 14-30, 2016 About the Survey This quarterly consensus survey, launched in March 2016, covers five ASEAN countries – Indonesia, Malaysia, the Philippines, Singapore and Thailand -- and India. It is conducted by Japan Center for Economic Research (JCER), in cooperation with Nikkei Inc., the publisher of The Nikkei and the Nikkei Asian Review. The results are disseminated through Nikkei publications and the JCER. It is linked with a similar consensus survey on the Chinese economy conducted by Nikkei and Nikkei Quick News (NQN). The analyses of both surveys are reflected in this report. The Questionnaires were sent on June 14, 2016, to experts across the region and 38 responses were collected by the end of the month. In addition to their forecast figures, economists’ perspectives and outlook on Asian economies are provided. Contents Overview Page 2 Forecasts Page 3 Risk Page 6 Comments Page 7 Country reports Indonesia Page 9 Malaysia Page 11 Philippines Page 13 Singapore Page 15 Thailand Page 17 India Page 19 Survey respondents Page 21 The survey team Page 22
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JCER/Nikkei Consensus Survey on Asian Economies
JCER/Nikkei Consensus Survey
on Asian Economies
July 2016
Survey Date: June 14-30, 2016
About the Survey
This quarterly consensus survey, launched in March 2016, covers five ASEAN countries – Indonesia,
Malaysia, the Philippines, Singapore and Thailand -- and India. It is conducted by Japan Center for
Economic Research (JCER), in cooperation with Nikkei Inc., the publisher of The Nikkei and the
Nikkei Asian Review. The results are disseminated through Nikkei publications and the JCER.
It is linked with a similar consensus survey on the Chinese economy conducted by Nikkei and
Nikkei Quick News (NQN). The analyses of both surveys are reflected in this report.
The Questionnaires were sent on June 14, 2016, to experts across the region and 38 responses were
collected by the end of the month. In addition to their forecast figures, economists’ perspectives and
outlook on Asian economies are provided.
Contents
Overview Page 2
Forecasts Page 3
Risk Page 6
Comments Page 7
Country reports
Indonesia Page 9
Malaysia Page 11
Philippines Page 13
Singapore Page 15
Thailand Page 17
India Page 19
Survey respondents Page 21
The survey team Page 22
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Japan Center for Economic Research July, 2016
July 2016 Issue
Survey Date: June 14-30
Overview
Growth revised down; Brexit adds uncertainty
Market risks increase, China fears persist
Philippine president: infrastructure a priority Economists revised down their forecasts on growth for several Asian countries for 2016 and beyond,
as the referendum in the U.K. on remaining in the European Union, known as Brexit, was won by
the leave camp. Financial turmoil and other market-related risks have become the major concerns for
economists, followed by the possibility of a Chinese economic slowdown. Expectations are high for
Philippine President Rodrigo Duterte, who has promised to prioritize infrastructure development
after winning a May election.
===================================
Main points of the survey
Note: Not all forecasts were revised after the Brexit vote.
Impact of Brexit
Economists expect Asia to feel the impact
of Brexit, the survey indicates. Growth
forecasts for three Association of Southeast
Asian Nations (ASEAN) countries –
Indonesia, Malaysia and Thailand – for 2016
were revised down. The average forecasts for
the ASEAN5 economies for 2017 and 2018
were also revised down.
The impact of Brexit is not fully reflected in
the survey as some respondents did not
include the impact of the Brexit result in their
forecasts for some areas of the economy.
Growth forecasts for the ASEAN5 were revised down for 2017 and 2018, when
compared with the March survey, in part due to the impact of the Brexit vote.
Forecasts for Indian growth are 7.7-7.9% for 2016/17, 17/18 and 18/19.
Financial market turmoil is conceived as the biggest economic risk in the coming 12
months in Malaysia, the Philippines, Singapore and India. Other market-related risks
are also a major concern in all six countries.
A Chinese economic slowdown continues to be seen as a big risk.
The growth forecast for the Philippines for 2016 is revised up 0.3 percentage point to
6.4%, reflecting optimism about new President Rodrigo Duterte. The top priority for
his administration is infrastructure development.
Growth rates of ASEAN5, India, China; in percent
Forecasts for 2016, onward; India’s figures for fiscal
year, which begins in April
0.0
2.0
4.0
6.0
8.0
10.0
2011 2012 2013 2014 2015 2016 2017 2018
ASEAN5 India China
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Japan Center for Economic Research July, 2016
The Brexit result, however, was considered a risk for Asia by many economists. Three months ago,
declining reform prospects and a Chinese economic slowdown were considered two of the biggest
risks in most countries. Now, “financial turmoil triggered by an unexpected event” is considered the
biggest risk in Malaysia, Philippines, Singapore and India; other market-related problems, such as a
fall in commodity prices, are among the list of major risks. (See the table on page 6)
The economists’ views are clear in their comments. Many said that the Brexit impact would first
reach financial markets; before hitting the real economy through trade and investment (see the table
of comments on Brexit in page 7). In addition, economists worry that the negative impact would
shake support for economic unification and regional integration through ASEAN, as Yose Rizal
Damuri of the Centre for Strategic and International Studies points out.
Even with the head wind of Brexit, the region’s economies are generally expected to maintain
growth. Forecasts for the ASEAN5 rise from 4.3% for 2016 to 4.9% for 2018. The growth forecasts
are nearly 8% for India from 2016/17.
For the Philippines, optimism on growth is higher than for the other four ASEAN countries.
Economists view infrastructure development as the policy priority for new President Duterte. (See
the report on the Philippines on pages 13-14)
Forecasts
1. Economic growth
2016 2017 2015 2016 2017 2018
Q1 Q2 Q3 Q4 Q1
ASEAN5 - - - - - 4.2 4.3 4.6 4.9
(4.3) (4.7) (5.1)
Indonesia 4.9 5.0 5.2 5.4 5.3 4.8 5.1 5.6 5.8
(5.2) (5.3) (5.3) (5.2) (5.6) (6.1)
Malaysia 4.2 4.2 4.4 4.5 4.6 5.0 4.3 4.5 4.9
(4.2) (4.5) (4.5) (4.4) (4.6) (4.8)
Philippines 6.9 6.6 6.2 6.2 6.3 5.9 6.4 6.2 6.7
(6.2) (5.9) (6.1) (6.1) (6.2) (6.9)
Singapore 1.8 1.8 1.8 1.8 2.1 2.0 1.8 2.0 2.7
(1.9) (1.9) (1.7) (1.8) (2.3) (3.3)
Thailand 3.2 2.6 2.6 2.5 4.0 2.8 2.9 3.3 3.3
(2.9) (3.0) (3.2) (3.0) (3.6) (3.4)
India 7.9 7.5 7.4 7.8 7.8 7.6 7.8 7.9 7.7
(7.5) (7.6) (7.8) (7.7) (7.8) (8.0)
China 6.7 6.6 - - - 6.9 6.6 6.3 6.3
- - - - (6.5) (6.2) (6.2)
Note: Year-on-year; in percent. Forecasts for 2016, onward.
India’s figures for fiscal year, which starts April.
Figures in parentheses: average forecasts in March survey.
Source: JCER/Nikkei Consensus Survey, Nikkei/NQN Survey, Haver Analytics.
- 4 -
Japan Center for Economic Research July, 2016
Growth strong in India, Philippines
Uncertainty remains about the impact of Brexit, but the survey indicates that a gradual increase in
growth is likely to continue for the next three years in the ASEAN5 economies. Growth optimism is
especially strong in the Philippines. It is forecast for 2016 at 6.4%, 0.5 percentage point higher than
was logged in 2015. The Philippine economy has been helped in part by the increase of consumption
stimulated by events related to the presidential election. It is expected that growth of 6% or more
will continue for 2017 and 2018. Increased investment in infrastructure and other fields as well as
private consumption is expected to help drive growth.
Indonesia is expected to maintain growth of 5% or more through 2018. The driving forces for the
Indonesian economy are investment and consumption.
Growth forecasts for India are more than 7.7% for the coming three fiscal years, which begin April 1
annually. Good weather conditions are expected for fiscal 2016/17, which will help drive growth in
the agricultural sector.
The negative impact of Brexit may be larger in countries whose economies depend heavily on
exports. Forecasts for Singapore, Malaysia and Thailand have been revised downward for two or
India “The departure of Dr. Rajan will have a negative impact on the currency”
(Kentaro Konishi, president & CEO, Daiwa Capital Market India)
Note: See the list of survey respondents on page 21 for official names and titles.
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Japan Center for Economic Research July, 2016
Highlights
Growth cut, but kept above 5%
The forecast figures for 2016 and beyond
were revised downward from the March
survey in the aftermath of the Brexit vote.
Growth of 5.1%, however, is expected for
2016, 0.3 percentage point higher than 2015’s
4.8%. Dendi Ramdani of Bank Mandiri
expects growth to continue, helped by a
“commodity price rebound and infrastructure
development.” On the Brexit impact,
respondents worry about long-term effects
rather than a short-term shock.
1. Growth prospects
Recovery to strengthen
The Q1 growth rate was less than 5%, but
economists expect a stronger recovery for Q4.
Barclays’ David Fernandez says, “We expect
the recovery to continue, albeit at a more
gradual pace.” Maybank Indonesia’s Juniman
says a recovery in Q2 was supported by
“private consumption, government spending
and investment,” and that he expects the trend
to continue.
2. Inflation
Energy, food prices to bring down inflation
The CPI inflation rate declined to 4.3% in
Q1 from an average of 6.4% in 2015, brought
down by weak oil and commodity prices. The
average forecast for 2016 CPI is 4.0%, within
the central bank’s target range of 3-5%. CIDES
Chairman Umar Juoro expects low inflation as
“the price of energy is low and food prices are
manageable.” Bank Mandiri’s Ramdani also
sees a gradual improvement in distribution and
supply-side issues leading to lower inflation.
3. Unemployment
More work available, but not enough
The unemployment rate is expected to
decrease due to economic growth. “The
acceleration of infrastructure projects will also
absorb a lot of labor,” says Maybank’s
Juniman. But the growth rate is not sufficient
“to offset fully [supply from] the new labor
force,” says Bank Mandiri’s Ramdani.
4.8 5.1
5.6 5.8
4.0
4.5
5.0
5.5
6.0
6.5
2011 12 13 14 15 16 17 18
yoy, %
June 2016 Ave.March 2016 Ave.
Note: Shadow shows range between max. and min.
forecasts; same applies hereafter.
Indonesia
- 10 -
Japan Center for Economic Research July, 2016
4. Exchange rate (end of the period)
Overseas influences to effect value
Forecasts spread between 13,150 and 14,800
rupiah in this survey, wider than the 12,500
and 14,000 rupiah in March. All economists
see a possible U.S. interest rate hike and other
influences from overseas markets affecting the
rupiah rate. Barclays’ Fernandez also said
domestic factors such as a constructive policy
backdrop, stable external balance, reserve
adequacy levels and high carry bode well for
the currency.
5. Interest Rate (BI Rate) (end of the period)
Lower interest rates anticipated
The Bank of Indonesia will from August
change its policy interest rate from the current
BI rate to a 7-day reverse repo rate. The BI rate
was cut four times this year from 7.5% at the
end of 2015 to 6.5% at the end of June. Most
respondents see further cuts. The Bank of
Indonesia is trying “to stimulate the economy
by lowering policy rates,” says Umar Juoro of
CIDES. Yose Rizal Damuri of CSIS says, “A
relatively low inflation rate would give space
for the Bank [of Indonesia] to relax its interest
rate policy.”
6. Stock (IHSG Index) (end of the period)
Small improvements expected
Analyst views remain effectively unchanged
from March. A gradual increase is expected in
the IHSG index in the coming years.
Maybank’s Juniman says that the upward
expectation is “due to the improving outlook
for the Indonesian economy.” However,
CIDES’s Umar Juoro says, “Capital markets
are very vulnerable to capital inflows and
outflows.”
7. Risks
China, market risks a worry
A Chinese economic slowdown and financial
turmoil were seen as major risks in the June
survey. In March, people were more concerned
about economic reform prospects. Bank
Mandiri’s Ramdani said that a government
revenue shortfall was also a big risk after
analyzing the budget.
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Japan Center for Economic Research July, 2016
Highlight (Real GDP growth)
Outlook revised down slightly
Forecasters expect GDP growth will moderate
in 2016 compared to last year. Growth for 2016 is
expected to be 4.3%, down 0.1 percentage point
from three months ago. RHB Research Institute’s
Lim Chee Sing expects a “continued slowdown in
2Q 2016 given the weak export outlook and
private investment.” Most expect growth to
recover modestly in 2017 and 2018.
1. Growth prospects
Growth seen rebounding after first half
Many forecasters expect growth to bottom out
in the first half of the year, before rebounding.
Nomura Securities’ Euven Paracuelles says,
“Growth is likely to pick up slightly in H2,
especially as palm oil production recovers from
bad weather” and “ongoing projects under the
Economic Transformation Program are also
supporting private sector investment.”
2. Inflation
Prices rises to be tempered by crude oil
While the effect of a goods and services tax rise
abates in 2Q16, factors such as a “toll road hike”
(Maybank’s Suhaimi Ilias) and the “removal of
more subsidies by the government” (Lim Chee
Sing) are expected to push up prices. Meanwhile,
AmInvestment Bank’s Patricia Oh Swee Ling and
others note “the upside pressure for 2016 is
mitigated by the lackluster global crude oil
prices.”
3. Unemployment
Situation expected to worsen slightly
The unemployment rate is creeping up given
“rising labor retrenchment in the oil and gas,
financial and manufacturing industries,” says Lim
Chee Sing. But it is not expected to worsen much
further “given sustained growth in the economy,
albeit on a moderating trend,” Lim said.
4. Exchange rate
Risk-sensitive currency may be undervalued
Many expect the ringgit to strengthen over time,
but it is also considered “highly sensitive to risk
gyrations,” says Barclays’ David Fernandez. He
expects “a significant degree of pressure,
especially if oil prices move lower again, given
the expectation of a renewed downturn in
commodity prices in the event of a leave outcome
[in the U.K. referendum].”
Max. Min.
Jan.-Mar.
Apr.-Jun. 4.2 (▲0.1) 4.7 3.6
Jul.-Sep. 4.4 (▲0.1) 4.7 3.9
Oct.-Dec. 4.5 (▲0.0) 5.2 4.0
4.3 (▲0.1) 4.5 3.9
4.5 (▲0.1) 5.0 4.0
4.9 (+0.1) 5.3 4.5
Note: Figures in parentheses show change from three months ago.
Average
2016 4.2
2015 5.0
2016
2017
2018
5.0
4.34.5
4.9
3.5
4.0
4.5
5.0
5.5
6.0
6.5
2011 12 13 14 15 16 17 18
yoy, %
June 2016 Ave.March 2016 Ave.
Note: Shadow shows range between max. and min.
forecasts; same applies hereafter.
2.1
2.52.6
2.9
1.0
1.5
2.0
2.5
3.0
3.5
2011 12 13 14 15 16 17 18
yoy, %
3.2
3.4 3.4
3.2
2.6
2.8
3.0
3.2
3.4
3.6
3.8
2011 12 13 14 15 16 17 18
%
4.29
4.143.95
3.81
3.0
3.5
4.0
4.5
2011 12 13 14 15 16 17 18
MYR/US$
depreciation
Malaysia
- 12 -
Japan Center for Economic Research July, 2016
5. Policy interest rate
No change likely
Many expect the OPR to be maintained this
year as inflation is kept in check and growth is
expected to pick up at a gradual pace. Suhaimi
Ilias, Euven Paracuelles and others point out
BNM may cut the statutory reserve requirement
(SRR) ratio if domestic liquidity conditions
tighten.
6. Stock price
Flat market expected
A rebound in stock prices from last year is
expected to be moderate at most. As Kenanga IB’s
Wan Suhaimie puts it, “Global economic
uncertainty has definitely affected forward
earnings guidance, and with the absence of a
rerating catalyst it puts a limit to the upside on the
KLCI.”
7. Risks
Concerns of market turmoil grow
Financial turmoil was picked by many as one of
the most significant risks, followed by a
slowdown in overseas economies and
repercussions from U.S. monetary policy changes.
Lim Chee Sing says financial turmoil “has the
highest potential of dragging down … global
economic growth at this stage.” Wan Suhaimie
thinks U.S. monetary policy and a Chinese
economic slowdown “are the main source of the
current imbalance in the global economy.”
8. Probabilities of oil prices and growth
Oil prices seen rising slightly
The most likely price band for oil prices has
shifted a little upward to $40-50 a barrel at the end
of 2016, which implies a limited increase from the
$48 seen at the end of June. Expectations for next
year also creeped up. Lim Chee Sing points out
“persistent disruption to supplies is providing a
very good support to oil prices currently.”
The GDP growth outlook has been revised
downward slightly for both 2016 and 2017. Wan
Suhaimie says his rule of thumb is “that for every
$10/barrel rise/drop in crude oil real GDP growth
for Malaysia would be up/down by about 0.3 to
0.5 percentage points.”
3.25 3.27 3.293.42
2.5
3.0
3.5
4.0
2011 12 13 14 15 16 17 18
%
1693 1731
1200
1400
1600
1800
2000
2010 2011 12 13 14 15 16
Jan.1 1977 = 100
Rank Risks
1Financial turmoil triggered by unanticipatedevent
2 Slowdown of U.S. economy3 Slowdown of Chinese economy4 Repercussions from U.S. monetary policy5 Increase of unemployment6 Economic reform prospects decline