ECONOMICS A still subdued external demand environment and fading policy pass-throughs are weighing on aggregate demand in Asia (ex-Japan). In the near-term, the growth trajectory will depend on the trend in external demand, and monetary and fiscal policy response, which will likely remain defensive in nature. Source: Morgan Stanley Australia Domestic demand remained weak, as the unwinding of the resources boom continued to weigh on the economy. The current setup of increased political uncertainty post elections and the move by one of the rating agencies to move Australia to a negative ratings watch has arguably increased the constraints for a fiscal policy response. China The combination of the fading impact of previous policy stimulus and no new incremental policy support in recent months has been weighing on the domestic trend. Fiscal spending and infrastructure investment growth have slowed down. Property investment growth, which had been one of the key drivers to the mini-cycle recovery, has also decelerated, as property sales growth has moderated due to the implementation of tightening measures in select cities with strong growth in property prices. Policy makers will likely implement defensive easing measures if growth continues to slow, but the pace of policy support is likely to be slower in the second half of the year, as compared to before. Hong Kong All growth indicators in Hong Kong paint a picture of persistent weakness in aggregate demand. Retail sales, property transactions, loan growth, and exports growth are still in the contractionary territory and in some cases for an extended period of time. Retail sales declined for the 16th consecutive month, a further indication of the broad-based, persistent slowdown in the Hong Kong economy. India Within domestic demand, two wheeler sales remain at robust levels and passenger car sales have rebounded in July. The pick-up in food prices over the last four months has meant that the transition to lower inflation has been delayed. In the last three months, the government has also embarked on a higher fiscal deficit. Indonesia Consumption-related indicators have shown some signs of stabilization recently, led by improving passenger car sales. The Bank of Indonesia has kept its policy rate unchanged after having cut it by a cumulative 100 basis points. No further rate cuts are expected from the central bank. Japan Weak wage growth, an uncertain global economic outlook and a strong yen limited growth in Japan. Businesses and consumers have been reluctant to spend, resulting in negative GDP numbers in five quarters over the past three years. The government has unveiled a 269B USD stimulus package, in an attempt to jumpstart the economy. Korea Passenger car sales contracted by 10% YOY, in July, after the expiration of tax benefits in June 2016, which has boosted car sales in the preceding months. Retail sales had improved further in the month, which was largely down to a favorable base of comparison. After cutting policy rates in June, the Bank of Korea has stayed on hold in its subsequent monetary policy meetings. The fiscal stance is likely to stay conservative, due to concerns stemming from aging demographics, particularly the weak financial position of pension funds as well as financial stability risks. Malaysia Export growth remained in the negative territory for the 21st consecutive month, which has displayed signs of sluggishness compared to earlier in the year. Overall domestic demand is still subdued and car sales have continued to contract. Capital goods imports have bounced back into positive territory but have slipped at the margin. Philippines The strong run of growth in domestic demand has continued almost unabated, as capital goods import growth stayed well above 50%, while passenger car sales continued to expand at a double-digit growth rate. Export growth remained negative for the 15th month and has slipped further at the margin. Singapore Most growth indicators continued to contract on a YoY basis, indicative of the cyclical and structural headwinds that the economy is facing. The sluggish global growth environment, coupled with headwinds to domestic demand, will continue to weigh on aggregate demand trends. Taiwan Consumption indicators including retail and auto sales have moderated, as subdued wage earnings growth continues to weigh on consumer demand. Recently, the government announced plans to boost investment through the provision of infrastructure support. These measures are expected to improve the domestic investment environment while enticing participation from the private sector. Thailand Growth within private consumption has held up relatively well, largely attributed to durable goods posting positive growth after a period of nearly three years. The economy has experienced a repeated pick up in the last couple months, but durability of this improvement in growth trajectory will be dependent on the policy response going forward, as well as external demand conditions. 4 | ASIAN SKY QUARTERLY — THIRD QUARTER 2016
BUSINESS JET FLEET AND GDP BY COUNTRY ECONOMICS Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Papua New Guinea Philippines Singapore South Korea Taiwan Thailand GDP (B USD)* BUSINESS JET FLEET † CIVIL HELICOPTER FLEET † 11,393 308 6,040 5,495 4,643 1,779 2,086 2,305 1,709 1,142 1,095 755 1,515 1,464 965 538 145 114 181 145 141 746 718 835 765 751 446 341 255 236 229 200 145 424 361 316 308 304 208 74 56 37 35 29 17 15 13 8 43 39 3 3 32 31 10 22 1 1 2010 2011 2012 2013 2014 2015 2016 2016 2010 2011 2012 2013 2014 2015 2016 2016 2010 2011 2012 2013 2014 2015 2016 2016 Q1 Q2 Q1 Q2 Q1 Q2 64 53 52 49 47 37 23 22 16 253 195 163 161 134 111 77 319 216 200 197 157 121 113 * 2014 & 2015 ASG data and historically adjusted using Jetnet fleet yearly increases. * GDP Source: Trading Economics.com † Business jet and civil helicopter fleet data obtained from ASG’s Fleet Reports. For more information, please download the Fleet Reports from www.asianskygroup.com. THIRD QUARTER 2016 — ASIAN SKY QUARTERLY | 5