Logo of Phnom Penh Post newspaper Phnom Penh Post - High income hopes fading for some Southeast Asian nations: economists

High income hopes fading for some Southeast Asian nations: economists

Content image - Phnom Penh Post
Indonesia is still growing too slowly to meet President Joko Widodo’s 2019 goal. AFP

High income hopes fading for some Southeast Asian nations: economists

Joko “Jokowi” Widodo, when he took the oath of office in 2019 to start his second term as Indonesian president, vowed that the average income of Indonesians would more than triple by the middle of the century, pushing the country into the ranks of modestly high income economies such as Poland and Chile.

Indonesia’s neighbours set similar goals in recent years too.

In October 2019, Thai Prime Minister Prayut Chan-o-cha set 2036 as the target for the kingdom’s gross domestic product (GDP) per capita to reach at least $12,700, the amount the World Bank fixed for joining the ranks of the rich.

Last year, Malaysia brought forward its plans to take its place among the “developed” countries by the middle of this decade.

But as regional economies count the cost of the Covid-19 pandemic, which has shuttered schools and offices as well as entire sectors such as tourism for up to two years, those aspirations are in disarray.

Soaring food and energy prices in the short term as well as upended supply chains and emergencies linked to climate change mean that exports and cheap labour will not be enough to drive the economic growth needed in the coming years.

“The scars left behind by Covid-19 are being hit by further shocks: war and climate change,” economist Alicia Garcia Herrero said in response to a question from The Straits Times during a recent online panel discussion hosted by the Asean +3 Macroeconomic Research Office (AMRO).

“We are looking at shock after shock,” she added.

AMRO has said that regional economies will struggle to make up for ground lost during the pandemic amid shortages of skilled labour and as cash-strapped governments rein in spending.

“Scarring is a major concern,” Hoe Ee Khor, AMRO’s chief economist, said during his presentation. “The longer the pandemic lasts, the greater the chance the scarring will be more extensive and more permanent.”

The Asian Development Bank (ADB) recently said that while Indonesia will see growth rates return to pre-pandemic days, at five per cent this year and 5.3 per cent next year, Southeast Asia’s largest economy is still growing too slowly to meet Jokowi’s goal.

Indonesia needs to register growth of nearly six per cent a year between now and 2040. Annual GDP growth averaged 5 per cent during the four years to 2019.

The country will need to double down on education and health services to boost productivity, Chatib Basri, Indonesia’s former finance minister, said in response to a question from ST during the online panel discussion.

“It has been two years of children not regularly attending school. We don’t know the quality of the labour market,” said Chatib. “Every country in Asia – not just Indonesia – will need to catch up.”

Malaysia’s GDP growth is expected to nearly double from last year to six per cent in 2022 before slowing to 5.3 per cent in 2023, the ADB said earlier this month. Thailand will register three per cent growth during the 12 months to December and 4.5 per cent in 2023.

If Malaysia’s GDP grows consistently at about six per cent in the coming years – something that has not happened in two decades – it would eke out a spot in the ranks of high income countries alongside Panama and Costa Rica by 2025.

But rising prices of most staples, including cooking oil and wheat that have doubled since the beginning of 2020, are expected to fan inflation throughout the region.

Economists expect this will trigger more spending on subsidies as countries like Indonesia dip into windfall earnings from palm oil, coal and nickel exports to cap the price of fuel and provide cash handouts to the poor rather than make investments in education and healthcare.

Political instability may also deter investment, economists warn.

Malaysia’s high income ambitions date back to 2009 when Najib Razak was prime minister. After he was ousted in 2018, his successor, Mahathir Mohamad, pushed the deadline to 2030 only to have the current incumbent, Ismail Sabri Yaakob, the country’s fourth prime minister in as many years, to bring the deadline forward to the middle of the decade.

“Covid-19 has certainly delayed progress in achieving those goals,” said Khoon Goh, ANZ’s Singapore-based chief economist.

“And now with the high commodity prices and global uncertainty, it could make it harder to reach those goals.”

To be sure, the emerging markets in Southeast Asia may meet their goals. China may relax its travel restrictions, unleashing the region’s biggest source of holidaymakers.

New trade pacts such as the Regional Comprehensive Economic Partnership may woo investment. E-commerce – expected to be worth $1 trillion a year in ASEAN by the end of the decade – could help drive growth.

But economists warn these are uncertain. As China doubles down on its lockdowns in its biggest cities including Shanghai, for example, a wave of Chinese holidaymakers is for now off the cards.

Of course, getting rich is only part of the story. As in the case of Singapore, South Korea and Taiwan, entering the ranks of high income economies yields outsized global standing, said Roland Rajah, lead economist at Sydney-based Lowy Institute.

“Most of South-east Asia had done very well over the last few decades,” he said.

“Now with Covid-19 and other global shocks, the region’s growth and development have taken another serious hit – one that I expect to have long-lasting implications.”



  • Ice cream, noodles flagged over carcinogen

    The General Department of Customs and Excise of Cambodia (GDCE) has identified three types of instant noodles and ice cream trademarks originating from Thailand, Vietnam and France that are suspected to contain ethylene oxide, which poses a cancer risk to consumers. The general department has

  • Exclusive interview with Josep Borrell Fontelles, High Representative of the EU

    CAMBODIA is hosting the 55th ASEAN Foreign Ministers’ Meeting (AMM) and Related Meetings this week with top officials from the US, China, and Russia and other countries in the region slated to attend and to meet with face-to-face with their counterparts on the sidelines. In

  • Rise in Thai air routes to Siem Reap fuels travel hopes

    Local tourism industry players are eager for regional airline Bangkok Airways Pcl’s resumption of direct flight services between the Thai capital and Siem Reap town on August 1 – home of Cambodia’s awe-inspiring Angkor Archaeological Park – which is expected to boost the growth rate of

  • ASEAN Foreign Ministers’ meet commences, Taiwan issue possibly on table

    The 55th ASEAN Foreign Ministers’ Meeting (AMM) and related meetings hosted by Cambodia kicks off in Phnom Penh on August 3, with progress, challenges, and the way forward for the ASEAN Community-building on the table. Issues on Taiwan, sparked by the visit of US House Speaker

  • Angkor lifetime pass, special Siem Reap travel offers planned

    The Ministry of Tourism plans to introduce a convenient, single lifetime pass for foreign travellers to visit Angkor Archaeological Park and potentially other areas. The move is designed to stimulate tourism to the culturally rich province of Siem Reap as the start of the “Visit

  • Recap of this year’s ASEAN FM meet and look ahead

    This year’s edition of the ASEAN Foreign Ministers’ Meeting (AMM) hosted by Cambodia comes against the backdrop of heightened global tensions and increasing rivalry between major powers that have been compared to the animosity of the Cold War era. The following is The Post’