ECONOMICS ● ASIA
Q1 2019
The 'perfect storm', if you think about it. Trade tensions escalated in
2018, the Fed hit the brakes, China tightened funding, and oil, for a
while at least, surged. All considered, growth across Asia was decent
enough. As we launch into the Year of the Pig, things may look a little
less daunting: China and the US are back talking, with tariff hikes for
now suspended, the Fed is moving towards a pause, China is easing
at the margin, and oil has plunged. Off to the races, then Not quite.
The global cycle is still cooling, providing headwinds for exporters.
Tighter financial conditions will drag down local demand with a lag.
And China will have to kick things up policy-wise to stabilise growth.
Sure, lower oil prices offer some relief, and low inflation could even
offer scope for cuts, if needed. But that's not enough in itself to get
Asia sizzlin' again. Bit of a 'slow roast', then, in the Year of the Pig.
News, news, news
Catch your breath. It's the turn of the year. Time for some reflection. Trade and tariffs dominated
the headlines. Enough to keep even the most hardened trader wide awake through it all. But the
direct toll on trade, at least so far, has been marginal. And the good news is that the US and China
are talking, with a scheduled further tariff hike suspended at least until 1 March 2019. The broader
issue, however, is that global demand is slowing, with growth in all major economies looking a bit
droopier (see also Janet Henry and James Pomeroy, Trading Down, 13 December 2018). That,
and the slowing tech cycle, will continue to weigh on exports from the region.
Amid all that tariff kerfuffle it's easy to forget that the bigger issue facing the region in 2018 was the
rise in dollar funding costs and a soaring greenback. With the Fed nearing the end of its tightening
cycle the pressure will now ease. But tightening financial conditions could yet impact growth with a
lag. Still, with inflation remarkably subdued nearly everywhere, and oil prices coming off the boil,
there will only be a need for selective, further tightening locally.
And then there's China. Its engine has been sputtering a bit of late, with infrastructure and private
consumption spending, especially on cars, pulling back. However, policy easing, notably a cut in
the tax burden for corporations, should help deliver a decent kick in 2019. Households, too, have
benefited from a revised tax code. In the end, policy easing should be enough to keep growth ticking
along at 6.6% on average in 2019, the same pace as in 2018. Hong Kong, meanwhile, being more
exposed to climbing US interest rates might see momentum slow, not least given a cooling real
estate market. Taiwan, too, could lose a bit of speed, weighed down by a tech cycle that's lost some
of its swagger.
Executive Summary
ECONOMICS ● ASIA
Q1 2019India, for all the volatility it endured in 2018, is still standing tall. Sure, growth has cooled at the
margin, with tighter liquidity putting a squeeze on non-bank lenders. Lower oil prices, however,
are a big relief, and once uncertainties around the upcoming national election are out of the way,
demand more broadly should stabilise. After a little dip, growth should thus average 7.3% over
the coming fiscal year. That's respectable enough, though Bangladesh could clock a faster pace
still, only slightly weaker than its record set the previous year. In Sri Lanka, growth should tick
up over the coming year, if still below trend, though recent political turbulence might start to weigh.
Japan dipped in and out of growth in 2018, partly due to weather disruptions, but likely still delivered
an overall annual expansion just under 1%. In 2019, expect much of the same, even as exports
cool. That's partly due to the front-loading of consumer spending in the run-up to a planned VAT
rate hike in October, with payback possibly prompting a contraction the year after (unless shelved).
Australia is still on a roll. Sure, housing looks a bit soggy, though it so far seems like an orderly turn
of the cycle. Job growth, though, is resilient and service exports continue to be a bright spot. Growth
should thus hold at 3% in 2019…yet another year of uninterrupted expansion, we lost count. New
Zealand, meanwhile, is following close behind, with its unemployment rate at a decade low (though
sentiment among businesses and consumers has been looking wobbly of late).
Growth in Korea will likely dip further below 3%, with cooling export growth delivering headwinds
and local construction pulling back as well. But consumer spending should prove decent enough
and extra fiscal spending should help, too.
ASEAN is a study in resilience. Given all the financial turbulence in 2018, growth remains impressive.
Indonesia, while ticking down, should hold at 5% growth next year, with the main focus on the
upcoming national election, after which reforms could gain momentum. The Philippines, though
grappling with bubbling price pressures, might lose a little steam, but an extensive infrastructure
build-out should deliver growth of 6%. Malaysia, under a new government, may have put some
major infrastructure projects on hold, but there's plenty of growth coming through elsewhere in
the economy, including in manufacturing as exporters gain global market share. Thailand, too,
found its mojo in 2018, with growth above 4% for the first time since 2012, though it may ease
again next year as the global trade cycle cools. Singapore might also grapple a little with the latter,
despite its robust services sector being still more dependent than most on growth elsewhere.
Vietnam is keeping its stride, topping the major ASEAN economies in the Year of the Pig.
HSBC GDP growth forecasts (% red denotes above consensus, grey below consensus)
2017
2018f
(old)
2018f
(new)
2018f
Consensus
2019f
(old)
2019f
(new)
2019f
Consensus
2020f
(old)
2020f
(new)
Australia 2.4 3.2 3.0 3.2 3.0 3.0 2.8 2.8 2.8
New Zealand 2.8 2.8 2.8 2.8 2.8 2.8 2.7 2.6 2.6
Bangladesh* 7.9 8.0 8.0 7.5 7.8 7.8 7.1 7.7 7.7
China 6.9 6.6 6.6 6.6 6.6 6.6 6.3 6.5 6.5
Hong Kong 3.8 3.5 3.5 3.6 3.0 2.7 2.6 2.7 2.5
India* 6.7 7.3 7.2 7.4 7.4 7.3 7.5 7.4 7.4
Indonesia 5.1 5.2 5.2 5.2 5.0 5.0 5.1 5.0 5.0
Japan 1.9 0.9 0.8 1.0 0.9 0.9 1.1 -0.2 -0.2
Korea 3.1 2.8 2.7 2.7 2.6 2.6 2.6 2.5 2.5
Malaysia 5.9 4.7 4.7 4.8 4.3 4.5 4.6 4.0 4.2
Philippines 6.7 6.5 6.2 6.3 6.5 6.0 6.4 6.5 6.4
Singapore 3.6 3.2 3.3 3.3 2.5 2.5 2.6 2.3 2.3
Sri Lanka 3.3 3.7 3.6 3.8 4.0 3.9 4.1 4.2 4.2
Taiwan 3.1 2.7 2.7 2.7 2.4 2.4 2.2 2.1 2.1
Thailand 3.9 4.4 4.2 4.5 3.7 3.7 3.8 3.5 3.5
Vietnam 6.8 6.7 6.7 6.8 6.5 6.5 6.5 6.3 6.3
Asia ex JN 6.2 6.1 6.0 6.0 6.0 5.9 5.8 5.9 5.9
Asia ex JN & CN 5.1 5.2 5.1 5.2 5.0 5.0 5.0 7.9 4.9
Asia ex JN CN & IN 4.4 4.2 4.1 4.2 3.9 3.9 3.9 3.8 3.7
Source: CEIC, Consensus Economics, HSBC. NB: Regional averages are nominal USD GDP weighted; old forecasts refer to those published in Asian Economics Quarterly: Looking for firmer ground, 4 October 2018.ECONOMICS ● ASIA
Q1 2019
Executive Summary 1
Key forecasts 4
Monetary policy assumption 5
Drifts and drags 6
China: Reflation to continue
amid tariff truce 18
Indicators 23
GDP 24
Inflation 25
Industrial production & unemployment 26
Consumption & saving 27
Investment 28
Trade 29
Economy profiles 31
Australia 32
Bangladesh 36
China 40
Hong Kong 44
India 48
Indonesia 52
Japan 56
South Korea 60
Malaysia 64
New Zealand 68
Philippines 72
Singapore 76
Sri Lanka 80
Taiwan 84
Thailand 88
Vietnam 92
Disclosure appendix 98
Disclaimer 100
Contents。