The Outlook for Southeast Asian Economies 2022

Although the general view into next year for Southeast Asian economies looks promising, due to ongoing developments some say we should expect less. A number of factors is driving this, but the ongoing theme is really Covid and its effects. Earlier in the year there was optimism that SEA could turn the corner on the pandemic and start to takeoff, but with vaccination rates low as a whole compared to other regions, expectations have come down and this outlook has been supported by the Asian Development Bank.  

However, all is not lost. Despite the obstacles the region is poised to see decent growth into the next year, albeit at a lower rate. And about 5% of growth seems to be the base case for many economists and banks. Now the good news is that SEA is not seeing a lot of inflationary pressures compared to other parts of the world. As other countries prepare to take back monetary policy that has been in place since early last year and are planning for an eventual increase in interest rates, the SE Asian central banks will largely stay accommodative.  This will not only keep less pressure on their financial systems, but should open up a good entry point for investors into the region next year and beyond.  

We also need to understand that considering the current situation risk has gone up. Although the region has not been experiencing a lot of the supply chain and souring issues that other countries have faced, new variants of the coronavirus could have far-reaching consequences. SEA has a habit of taking steps first and asking questions later. Large countries in Asia, including Japan and China, with is zero-infection policy, are not immune to these strong regulations. If many countries in the region were to go into lockdown mode next year, growth rates would need to be recalibrated immediately. So, in other words: a lot will be dependent on what trends emerge and how politicians react.