After last year’s doom and gloom, 2020 is beginning to look upbeat.
In Southeast Asia, which is a region that is slated for stellar growth, the report noted that pro-growth policies are primarily driven by rate cuts in the U.S. and Europe.
As a result, Indonesia, the Philippines, Malaysia, and Singapore are expected to increase spending on public projects as a proportion of GDP, the report forecasted.
"There are also positive signs on the trade integration front," says Deloitte Asia Pacific's Clients & Industries leader Vivian Jiang. "The Comprehensive and Progressive Trans-Pacific Partnership gives its 11 members, including four ASEAN economies, enhanced market access, and the Regional Comprehensive Economic Partnership will reduce export-import paperwork and has introduced a limited degree of service sector liberalization."
But the report also warned that economies should avoid the excessive stimulus that could cause a boom-bust cycle, U.S. policy needs to remain stable, and financial risks, particularly from quantitative easing, need to continue to be reined in.
Specifically, the report singled out automotive, aviation and electronics as industries that will see high growth.
"The decline in the automotive sector since 2018 was caused by factors including new emission standards in several markets, and other restrictions on production. This decline is likely to reverse this year, with a further boost from continued luxury sales volume growth," says Jiang. "Problems in the aviation sector are likely to ease as well, and there are signs of a resurgence in semiconductor billings, which should boost the electronics sector to help drive regional exports."
Consumption will also increase due to labor market stability, increasing remittances, and easing monetary conditions.
Countries that will do well:
China: Despite a long-term, secular growth downtrend, China is expected to regain its balance. Meanwhile, Hong Kong’s role as a leading financial center with its currency peg will benefit, as will the proposed government stimulus.
Indonesia: A young workforce, increasing urbanization, and monetary policy support for demand will see the economy maintain a steady growth of 5% in 2020. The economy is becoming more stable but has yet to fully take advantage of the diversion of production out of China.
Japan: Exports have contracted, and business confidence is subdued, and natural disasters have further depressed economic activity. However, GDP growth has been quite resilient. Economic growth is expected to sustain at about 0.5% over the next two years.
Malaysia: Strong domestic demand led by household spending underpins Malaysia's economic resilience, and its exports have outperformed. Its competitive currency, growth in manufacturing activity, and a resumption in infrastructure projects are expected to support continued economic growth.
New Zealand: The economy slowed in early 2019, mainly due to global headwinds. It is expected to return to trend levels of about 2.5% growth in the next couple of years, supported by factors including a tight job market, still-strong population growth, and decent export prices and volumes.
The Philippines: The economy bottomed out in mid-2019, and is set to be boosted by a revival in the electronics sector, strengthening exports thanks to an expected pick up in the Chinese economy, continued strength in remittances and policy support that should drive consumption.
Singapore: The country is expected to enter recovery in 2020, supported by improving global growth and stronger electronics and precision engineering demand. There are also green shoots in finance, insurance, essential services, and the "new economy." The outlook for investment growth is also positive.
South Korea: The study is upbeat about prospects for the South Korean economy in 2020, with an expected increase in demand for its manufactured goods. Government measures, including a record budget of KRW513.5 trillion (USD4.36 billion) for the year, should protect against downside risks.
Taiwan: Taiwan's economy was resilient in 2019 despite being caught in the crossfire of the US-China trade war and the step-down in the global electronics cycle. Deloitte expects the economy to outperform in 2020 on rising private investment, government policy to attract high-end manufacturing and other factors.
Thailand: After a slow start, the economy is expected to pick up in 2H20, with export growth likely to have bottomed out, increasing tourist arrivals, rising farm incomes, favorable fiscal policy, and a recovery in private investment.
Vietnam: The country is expected to remain one of Southeast Asia's outperformers in 2020. It is one of the primary beneficiaries of the relocation of production from China, which is prompting a surge in foreign investment. Its main challenges are manpower constraints, supply chain frictions, and an infrastructure gap.
Australia and India are not expected to perform well in 2020. Australia's drought and decline in house prices will see it only starting to grow in 2021, despite tax and interest rate cuts. India is still recovering from the Non-Bank Financial Companies (NBFC) crisis and hobble growth despite government stimulus and increasing downside risks.
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