Full Report - Subregional Office for East and North-East Asia - escap

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2013
by some 7%. After the start of 2013, the Thai
baht appreciated sharply, by nearly 3% in January
alone. In both countries, increased capital inflows
into short-term securities were a major factor, as
reflected in record stock market performance. In
the case of Thailand, where Japanese investment
is dominant, the yen’s depreciation also served to
strengthen the baht as businesses were expected
to benefit from cheaper capital imports from Japan.
Bucking the trend, the Indonesian rupiah depreciated
by some 8% in 2012, amid concerns over the
current account deficit and the relatively shallow
foreign exchange market.
Meanwhile, remittances continued to provide an
important source of income from abroad. Remittance
inflows to the Philippines proved rather resilient
with modest growth, despite a fragile recovery in
the United States, the key destination for Philippine
overseas workers. In Viet Nam, remittance inflows
in 2012 increased by more than 10% compared
with 2011, that is, to more than $10 billion.
In the least developed countries, a pattern continued:
that of high current account deficit financed by
foreign direct investment and official loans. In
Cambodia, the trade deficit widened in 2012, as
garment exports slowed while strong investmentrelated
imports continued. The current account
deficit edged up to 10% of GDP in 2012. In the
Lao People’s Democratic Republic, exports continued
to benefit from high global prices of copper and
gold. Foreign direct investment increased sharply,
mainly for hydropower projects, covering a substantial
portion of the current account deficit, which remained
high at nearly 22% of GDP in 2012. In Myanmar,
commodity exports and foreign investment in the
energy sector have increased in recent years. The
current account deficit edged up to 4% of GDP in
2012. To set the stage for broad-based economic
development, the Government unified the exchange
rate in 2012 and replaced the official peg with a
managed float.
In Timor-Leste, the current account surplus fell
from 55% of GDP in 2011 to about 43.5% in
2012, owing to lower petroleum revenue and rising
imports, which have more than doubled since 2010.
In Brunei Darussalam, exports continued to be driven
by oil and gas, but non-oil and gas exports have
seen a mild increase since 2011. Foreign direct
investment is concentrated mostly in mining and
quarrying activities, although the share of inflows
into the wholesale and retail sector has increased
sharply since 2010.
Future outlook and policy challenges
Countries in South-East Asia are expected to maintain
high economic growth rates in 2013. Domestic
demand is expected to remain robust despite a
slight pick-up in inflation while the external sector
is set to benefit from a modest improvement in
global trade compared with the situation in 2012.
In addition to country-specific
circumstances, an important
determinant in the outlook for the
subregion will be the creation of the
ASEAN Economic Community
Indonesia’s economy is projected to enjoy a robust
growth of 6.6% in 2013. Domestic demand should
continue to be the main growth driver, as exports
will likely remain sluggish. In addition to uncertainty
in advanced economies, the extent of China’s
slowdown and its implications for demand and the
price of Indonesia’s commodity exports are important
issues. Managing the volatility of capital flow will be
another important factor, given the sizeable portion
of local currency debt held by foreign investors.
Output growth in the Philippines is projected to
remain high at 6.2% in 2013, driven by strong
private consumption. Poor global demand, including a
slowdown in major trading partners such as China,
could impede economic expansion, however. Speedy
growth could materialize if progress on the publicprivate
partnership initiative gains more momentum,
helped by the upgrade of the country’s rating to
investment grade status in March. The Government
plans to raise infrastructure spending to 5% of GDP
by 2016 from 2% in 2012.
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