Monthly Regional Update (September 2020)

Regional Economic and Policy Developments in September

ASEAN manufacturing PMIs have been more stabilized, though remain contract; yet to see concrete signs of recovery

Krungsri Research’s view

• After a deep contraction in 2Q20, the ASEAN Manufacturing PMI, based on IHS Markit survey, has improved gradually to a 6-month high of 49.0 in August. The recovery is in line with that for overall Asia (excluding China) but still lags behind the global average.
• Myanmar and Indonesia are leading the improvement in the ASEAN index. This is supported by recovering business conditions in the manufacturing sector as the two countries continue to relax lockdown measures. Output and new orders also expanded at a faster rate. These led to a mild improvement in the job market. However, we project the recovery has been driven by pent-up demand and reopening in some countries, which could be temporary given still-fragile consumption.
• Countries which registered a drop in PMI readings are Vietnam and the Philippines, due to a resurgence of COVID-19 cases. However, Vietnam has better conditions to support a recovery because it has had better success in containing the outbreak; the number of new cases has dropped from a daily average of 50 in the last week of July to single-digit since late-August.
• Looking ahead, we see a mixed – and weak – recovery for the manufacturing sector across ASEAN. They would be dragged by (i) still-rising COVID-19 cases in the Philippines and Indonesia, and authorities in Vietnam has reinstated lockdown measures in some cities after a spike in new cases, (ii) weak external demand as global growth would remain sluggish, and (iii) high unemployment for an extended period, which would cap consumer spending for a longer period.

Cambodia resumes international flights with several Asian countries; outlook remains negative given strict conditions

Lao PDR: Moody’s downgrades the government’s issuer rating 2 notches to Caa2, outlook changed to “Negative” 

Myanmar targets 6% GDP growth in FY2020-21, led by an anticipated increase in FDI inflows and election spending

Vietnam’s exports hit new high at USD26.5bn in August; promising growth outlook

Vietnam may halve 2020 target growth range to 2.0-2.5% given weak consumption and modest recovery of exports

Indonesian government adjusts 2020 target GDP growth to -1.1% to +0.2% due to larger downside risks

Philippines: Strong peso will tame inflationary pressure; more room to ease monetary policy

Philippines to launch PhilSys national ID with biometric information, improving access to the unbanked