Southeast Asia: Economic performance in the first half of 2014
Post-recession, countries have been focusing on returning to growth and prosperity after battling the affects of the downturn for the past few years.
Across the world, some nations have successfully ridden the storm and are experiencing positive growth, while others are lagging behind.
Here we assess the economic background in South East Asia, particularly Singapore and Malaysia, to see what has happened in the first part of 2014, compared to our other operating regions of Europe and Australia.
Singapore and Malaysia have been recovering from the global financial crisis over recent years after taking a hit from falling consumer demand in advanced economies such as Europe and the US. So far this year they appear to be doing relatively well, with the exception of one or two blips in their performance.
In Singapore, for example, the annual GDP growth rate for the first quarter was lower than expected at 4.9 per cent compared to the 5.3 per cent that was forecast. A reduction in manufacturing activity may have been responsible for this, with figures released in both April and May showing a decline in output where analysts had been expecting an increase.
Inflation in Singapore also edged up to 2.7 per cent in May, from 2.5 per cent in April and 1.2 per cent in March, although the increase has largely been attributed to fluctuations in Certificate of Entitlement premiums for vehicle ownership.
Also, the country's unemployment rate crept up slightly in the first quarter, but since it still remains relatively low at two per cent it is not causing any immediate concern.
In Malaysia, first quarter GDP growth came in at 6.2 per cent, which was the highest since the fourth quarter of 2012 and puts the country on track for achieving its target of above five per cent growth for the year.
Unemployment figures in Malaysia also paint a positive picture, with joblessness falling during the first half. April's unemployment figure was 2.9 per cent compared to three per cent in March.
One area of slight concern is inflation, which began to move above its long-run average at the end of the first half of the year, prompting Malaysia's central bank to raise interest rates by 25 basis points to 3.25 per cent as the second half of the year got underway.
Bank Negara Malaysia said the increase, which was the first since May 2011, was implemented in an effort to "mitigate the risk of broader economic and financial imbalances that could undermine the growth prospects of the Malaysian economy".
The months ahead are looking fairly uncomplicated for Singapore and Malaysia. Singapore's economy is expected to grow 3.8 per cent in 2014, according to a quarterly survey of economists released by the Monetary Authority of Singapore last month.
This was down only slightly on the previous forecast issued three months earlier of 3.9 per cent, and the disappointing manufacturing figures could be a factor in this. What happens with regards to manufacturing output in the second half of the year could, however, have further impact.
There is also uncertainty over inflation, with some commentators expecting price increases to slow down or remain stable and others anticipating further increases. United Overseas Bank economist Francis Tan told Channel NewsAsia that he does expect to see higher inflation in the months ahead, particularly since it remained quite low last year meaning 2014 started at a low base.
The good news is that these may only be small bumps in the road. DBS Bank economist Irvin Seah told the Business Times: "Overall, it's not a very rosy picture, but it's not a dire situation either. Things are just relatively flat, and that makes sense because it reflects the current global economic conditions."
Sentiment is more positive in Malaysia, where economic recoveries in Europe, the US and China are expected to lead to an increase in exports. Indeed, the World Bank predicts that the country's economy will grow by 5.4 per cent in 2014 thanks to better conditions in advanced economies.
However, it may not all be plain sailing for the so-called Asian Tiger, as some economists have expressed concerns over its high levels of debt, which make it extremely vulnerable to external shocks and place its economic stability at risk.
Sarah Fowler from Oxford Economics said in a recent report: "Malaysia has generally been regarded as one of Asia's success stories. Its recent economic performance has been solid, it runs a strong, though shrinking, external balance and its political background appear stable. But all is not quite what it seems."
She explained: "Prompted by its high levels of public debt, rising external debt and shrinking current account surplus, there has been a shift in the perception of risks towards Malaysia and away from Indonesia."
In general, there is a feeling of optimism and positivity in all three regions in which we operate - South East Asia, Australia and Europe. Yes, the recession had an impact, but some time has passed, and memories of the bad times are fading. South East Asia in particular is now enjoying a return to significant economic growth.
A word of caution though, as recovery is still relatively new, and could yet be shortlived. Any new crisis could have a disastrous effect and return countries to recession. Companies across the globe are still being cautious, but confidence is returning slowly.
Over the next few months as 2014 comes to a close, we will be able to gauge whether the next few years will be more economically secure or a return to an era of caution and austerity.
To read our report on Australia’s economic performance click here.
To read our report on Europe’s economic performance click here.