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

MACROECONOMIC PERFORMANCE AND POLICY CHALLENGES AT THE SUBREGIONAL LEVEL CHAPTER 2
Thailand’s economy is projected to grow by 5.3%
in 2013. Private consumption should remain strong,
supported by higher wages and modest inflation,
although fiscal schemes, such as waived excise tax
for first-car purchases, have expired. The economywide
adjustments to a higher-wage environment could
affect growth performance, especially among small
and medium-sized enterprises. The outlook will also
depend on how speedily the public investment plan
on water management moves forward. Malaysia’s
output growth is projected to slow slightly to 5% in
2013. The introduction of minimum wages, higher
remuneration for civil servants, modest inflation and
government schemes to support household incomes
should continue to propel consumer confidence and
spending. Impressive, above-trend fixed investment
growth recorded in 2012 could be sustained
depending on the progress made on the reform
agenda. Singapore’s output growth is projected
to pick up to 3% in 2013, partly on a low base.
Although the global information technology industry
is not anticipated to rebound forcefully, Singapore
is set to gain from generally revived global trade
in 2013. Domestic-oriented activities, such as the
construction sector, are likely to be major growth
drivers, supported by negative real interest rates.
Viet Nam’s economy is expected to regain its
momentum in the second half of 2013, resulting
in a slight acceleration in output growth to 5.5%
in 2013. Much will depend on restoring confidence
in the economy through keeping inflation in check,
addressing vulnerabilities in the banking sector and
restructuring less efficient State enterprises, as
emphasized in the government directive approved in
February 2013. Cambodia’s output growth is expected
to remain high at 7% in 2013, on the back of a
recovery in garment exports and continued growth
in key sectors, including agriculture, tourism and
construction. The Lao People’s Democratic Republic
is also expected to maintain high growth of 8.1% in
2013, supported by strong mining and hydropower
exports as well as increased foreign investment
in the light of its accession to WTO. Myanmar is
expected to achieve a high economic growth rate
of 6.3% in 2013, as the impact of recent economic
reforms is felt and infrastructure investment increases,
albeit gradually. Timor-Leste’s output growth is also
expected to remain high at 10%, on the back of
increased public outlays financed by oil revenue.
Brunei Darussalam’s output growth is expected
to slow to 1.5%, as adjustments take place in its
petroleum sector.
In addition to country-specific circumstances,
an important determinant in the outlook for the
subregion will be the creation of the ASEAN
Economic Community (AEC), a single market and
production base, by 2015. Under the AEC framework,
progress is being made in tariff reductions, rules
of origin and customs procedures, as well as in
services liberalization in priority sectors, namely
telecommunications, financial and professional
business services. As highlighted in box 2.5, however,
a key challenge will be to narrow the socioeconomic
gaps remaining between the more developed and
less developed members of ASEAN, particularly in
the area of human capital, to ensure that the less
developed members are also able to participate
more actively in the regional production networks.
Compared with the strong economic performance
of the subregion, employment growth has lagged
behind, while vulnerable employment and youth
unemployment remain persistently high. The
encouraging news is that countries have begun to
introduce and expand the coverage of social safety
nets, such as health care and pension schemes.
In Indonesia, the Government has
laid out eight priorities for sustainable
growth, with green jobs as an
overarching theme
In Indonesia and the Philippines, where the labour
force is growing rapidly, employment growth slowed to
1.4% and 1.3% respectively in 2012, compared with
3.6% and 2.4% in 2011. The quality of employment
is also a major concern. Informal employment as a
share of non-agricultural employment was as high
as 72.5% in Indonesia, 70.1% in the Philippines
and 68.2% in Viet Nam, the three most populous
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