Asia Monthly Outlook Another Slow Year For Growth In 2020 November 2019
Disclaimer THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
Contents 1. Asia Pacific: Still Sluggish Growth Trajectory 2. China: Policy Measures To Cushion Slowdown 3. South Korea & Taiwan: Divergence Amid Trade War Woes 4. India: An Economic Goliath Under Pressure 5. ASEAN: Ample Space For Policy Support Amid Slowing Trade 6. Australia & New Zealand: Growth To Remain Weak Amid External Pressures 7. Fitch Solutions Macro Research Vs Consensus 8. Data Pack
Asia Pacific: Still Sluggish Growth Trajectory Growth Being Taken A Notch Lower Real GDP Growth, % chg y-o-y • We expect growth to remain slow relative to 5.4 history in 2020. • Sluggish growth will likely be driven by 5.2 pockets of growing political risks in the region, global trade tensions and weakening growth across major global 5 economies such as China, the US and the EU. 4.8 • Over the long-term, growth will stabilize on the back of policy support and a slight 4.6 improvement in external conditions. • Many countries will be forced to make structural reforms in order to attract foreign 4.4 investment which will therein support growth. 4.2 • Heightened political risk in key markets like Hong Kong will exert downside risks to the 4 region’s overall performance. 2017 2018 2019f 2020f 2021f 2022f 2023f 2024f Source: Fitch Solutions 4
Q319 GDP Mixed Picture For Outlook Market Q319 GDP Consensus Surprise • A raft of GDP prints was released over the course of October, with a mix of upward and downward surprises. Hong Kong came in Philippines 6.2 6.0 0.2 weak due to ongoing political risk, but Taiwan significantly surprised on the upside. Taiwan 2.91 2.45 0.5 • China’s growth continued to weaken in Q319 coming in at 6.0% y - Thailand 2.4 2.3 0.1 o-y, the slowest pace of growth in more than 27 years. We at Fitch Indonesia 5.0 5.0 0.0 Solutions have therefore revised our 2019 real GDP growth forecast to 6.1% from 6.3% previously. China 6.0 6.1 -0.1 • External sector weakness dragged growth in many trade focused Korea 2.0 2.1 -0.1 countries like Japan, Malaysia and Singapore. Singapore 0.1 0.3 -0.2 • For Hong Kong we now forecast a full year contraction of 1.2% in 2019, down from a 1.0% expansion previously. We expect the Malaysia 4.4 4.9 -0.5 technical recession that began in Q319 to persist through 2020, Japan* 0.2 0.9 -0.7 and this is reflected in our 2.4% contraction forecast for 2020. Hong Kong -2.9 -0.3 -2.6 *Japan is q-o-q annualised. Source: Fitch Solutions 5
China: Policy Measures To Cushion Slowdown Services Supporting Growth Elevated Tariffs To Continue Weighing On External Sector Real GDP, % chg y-o-y Exports & Imports In USD Terms, % chg y-o-y Exports Imports Primary (LHS) Secondary (LHS) Tertiary (LHS) Overall (RHS) 9 6.6 70 60 8 6.5 50 7 6.4 40 6 6.3 30 5 6.2 20 10 4 6.1 0 3 6 -10 2 5.9 -20 1 5.8 -30 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114 Q314 Q115 Q315 Q116 Q316 Q117 Q317 Q118 Q318 Q119 Q319 0 5.7 Q318 Q418 Q119 Q219 Q319 Source: Wind, Fitch Solutions • We have revised our forecast for China’s real GDP to come in at • We believe that investment will be a key drag on the economy, as 6.1% in 2019 from 6.3% previously, and 5.9% in 2020 from 6.1% companies relocate to avoid higher US tariffs. previously. • While the US-China Trade War will weigh on the external sector, • Consumption, though slowing, will remain a key growth driver as we expect imports to fall in tandem with exports, cushioning the the government will increase stimulus, including demand side slowdown. measures. 6
South Korea & Taiwan: Divergence Amid Trade War Woes External Headwinds A Drag On Growth Taiwan Reaping Benefits Of Trade Diversion South Korea – Exports And Semiconductor Exports, % chg y-o-y Taiwan – Exports To USA, % chg y-o-y, 3mma Exports Semiconductor Exports Taiwan China 80 60 50 60 40 30 40 20 10 20 0 0 -10 -20 -20 -30 -40 -40 Apr-15 Jul-15 Oct-15 Apr-16 Jul-16 Oct-16 Apr-17 Jul-17 Oct-17 Apr-18 Jul-18 Oct-18 Apr-19 Jul-19 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan/11 Jun/11 Nov/11 Apr/12 Sep/12 Feb/13 Jul/13 Dec/13 May/14 Oct/14 Mar/15 Aug/15 Jan/16 Jun/16 Nov/16 Apr/17 Sep/17 Feb/18 Jul/18 Dec/18 May/19 Oct/19 Source: Bloomberg, Fitch Solutions Source: Bloomberg, Fitch Solutions • In contrast, Taiwan’s real GDP growth is forcast to remain resilient • We have revised down our forecast for South Korea’s 2019 real at 2.6% in 2020, as the re-shoring of Taiwanese companies from GDP growth to 1.9% from 2.1%, following the release of Q3 GDP mainland China supports investments. figures; our 2020 forecast remains at 2.1% • Exports to the US will likely pick-up as American firms turn to • Domestic demand will also remain sluggish due to high household Taiwanese exporters to avoid higher tariffs on Chinese goods. debt levels and weak employment growth. 7
India: An Economic Goliath Under Pressure Strong Headwinds To Persist Into The Coming Year Real GDP Growth, % • We forecast India’s real GDP growth to 7.4 recover slightly to 6.6% in FY2020/21 (April – March) from our forecast of 6.4% in 7.2 FY2019/20. • Our view for only a modest recovery is 7.0 informed by favorable y-o-y base effects and for the existing NBFC credit squeeze to 6.8 ease over the coming quarters, which should aid private consumption. 6.6 • The government’s corporate tax cut would also somewhat present tailwinds for fixed 6.4 capital formation. • Risks to our forecasts are to the downside. 6.2 Poor growing weather during the 2019 summer crop will constrain the rebound in 6.0 rural consumption, while a weak global outlook will continue to weigh on exports 5.8 growth. FY2017/18 FY2018/19 FY2019/20f FY2020/21f Source: Fitch Solutions 8
ASEAN: Ample Space For Policy Support Amid Slowing Trade 2020 To Match 2018 Performance At Best Real GDP Growth, % 2018 2019f 2020f • The ASEAN region will only make a modest 8.0 recovery in terms of growth in 2020 relative 7.0 to 2019. • We expect the Vietnamese and Malaysian 6.0 economies to continue slowing, but see a slight rebound in the Philippines, Indonesia, 5.0 Thailand, and Singapore in 2020 versus 2019. 4.0 • Broad monetary easing in the region along with expansionary fiscal policies should 3.0 support growth. • However, we note that the region’s high 2.0 exposure to global trade continues to put its outlook at risk of a further deterioration in 1.0 trade relations among global powers. 0.0 Vietnam Philippines Indonesia Malaysia Thailand Singapore Source: Fitch Solutions 9
Australia & New Zealand: Growth To Remain Weak Amid External Pressures Base Effect Driven Recovery in 2020 Real GDP Growth, % Australia New Zealand 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 2017 2018 2019f 2020f 2017 2018 2019f 2020f • We forecast New Zealand’s growth to slow from 2.8% in 2018 to • We revised down our growth forecast for 2019 from 2.3% to 2.4% in 2019. 2.0%, following the weak performance of the economy in Q219. • In 2020 the country will stabilize at 2.5% , but will struggle to • A combination of low base effects and policy support will prop up regain economic strength amid rising weakness in its external growth in 2020. • Headwinds to the forecast will remain strong, however. Especially sector. • Domestic demand will also remain sluggish due to poor business as China’s growth slows, thereby hurting Australia’s exports . sentiments and slowing job growth. 10
7 Fitch Solutions Macro Research Versus Consensus
Fitch Solutions Macro Research Versus Consensus 2019 Real GDP Growth End Of 2019 Exchange Rate % Currency Bloomberg Consensus Last Bloomberg Consensus Last Country Currency Fitch Solutions Fitch Solutions Consensus Month Consensus Month Australia 2.0 1.8 1.9 USD/AUD 0.69 0.67 0.67 Bangladesh 7.8 7.7 7.5 BDT/USD 85.30 - - China 6.1 6.1 6.2 CNY/USD 7.25 7.16 7.19 Hong Kong -1.2 0.6 0.6 HKD/USD 7.77 7.85 7.84 INR/USD 71.50 71.50 71.93 India 6.4 6.2 6.5 Indonesia 5.3 5.0 5.0 IDR/USD 14,100.00 14,275.00 14,300.00 Japan 0.5 0.9 0.9 JPY/USD 110.00 106.00 106.00 Macau 4.1 - - MOP/USD 7.99 - - Malaysia 4.6 4.5 4.5 MYR/USD 4.17 4.21 4.22 MMK/USD 1,600.00 - - Myanmar 6.4 - - New Zealand 2.4 2.3 2.4 USD/NZD 0.62 0.63 0.63 North Korea -4.0 - - KPW/USD 143.00 - - Pakistan 3.3 3.3 3.3 PKR/USD 175.00 - - Philippines 5.7 5.8 5.9 PHP/USD 52.30 52.00 52.50 SGD/USD 1.36 1.40 1.40 Singapore 0.5 0.5 0.7 South Korea 1.9 1.9 1.9 KRW/USD 1,220.00 1,200.00 1,210.00 Sri Lanka 2.7 2.6 2.6 LKR/USD 185.00 - - Taiwan 2.5 2.1 2.1 TWD/USD 30.40 31.25 31.40 Thailand 2.8 3.0 3.0 THB/USD 30.10 30.80 30.80 VND/USD 23,400.00 23,200.00 23,350.00 Vietnam 6.9 6.8 6.7 Source: Bloomberg, Fitch Solutions, updated on October 10 12
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