21 Jan 2017

The Business Times

By VIVIEN SHIAO

Singapore

THE year 2017 may be better than expected, despite gloomy forecasts elsewhere due in part to protectionist rhetoric from the US, according to Deloitte.

In its first edition of the Voice of Asia series of reports that was released on Friday, Deloitte points out that a stabilising world economy, a global pick-up in trade and a consumer boom in Asia are three factors that suggest that global growth may surprise on the upside this year. Asia, in particular, is set to lead the way.

In fact, Deloitte predicts that global growth could accelerate in 2017, with leading indicators for world trade rising, and benefits of that already spilling into Asia via accelerating export orders.

Asean nations are well placed to capitalise on this global recovery in trade, said the report. For example, the rise of manufacturing goods exports should see stronger growth in Malaysia, Thailand and Vietnam, while the recovery of commodity prices will benefit Indonesia.

Despite some uncertainty over President Donald Trump, Deloitte suggested that his influence on global trade may be overstated. Indicators point to global trade strengthening, despite the rise of nationalistic and protectionist sentiment around the world. In South-east Asia, it is likely that the strengthening of intra-regional trade would outweigh the potential rise of protectionism from other parts of the globe, said Deloitte.

The report also noted that China and India are increasingly being powered by consumer booms, providing Asia with an additional line of defence if global growth is not as good as expected and trade tensions boil over.

With income levels continuing to grow in South-east Asia, Deloitte said, consumers in South-east Asia would play an anchor role in supporting domestic demand and help buffer their economies from any adverse developments that may surface globally.

But significant risks still need to be managed, including continuing stresses in global financial markets, whether the anticipated depreciation of the Chinese yuan can be achieved in an orderly fashion, and the threat of resurgent protectionism.

Deloitte said that the real shock for markets may well be a larger drop in the Chinese yuan. However, the report said that South-east Asia economies are better able to limit the impact from any adverse developments.

Manu Bhaskaran, director of Centennial Group and Deloitte Alliance Partner, commented: "Despite some headwinds, Asian economies are likely to perform better this year than last. Stresses and setbacks are possible but our view is that Asian economies are today more resilient to these."

Centennial Asia Advisors supported Deloitte in producing the Voice of Asia report.

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Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission