汇丰银行东盟宏观经济东盟视角当改革遇到政治20171031HSBCASEANPerspectives

Disclaimer&DisclosuresThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.Issuerofreport:TheHongkongandShanghaiBankingCorporationLimitedViewHSBCGlobalResearchat:–ResearchIsyouraccessagreed?CONTACTustodayTheupcoming31stASEANSummitinManila,withPresidentTrumpinattendance,willmarkthebloc's50thanniversary……agoodtimetotakestockoftheregion'sgrowthpotential,andthereformsneededineachcountrytosuperchargegrowthHowever,abusypoliticalcalendaroverthenexttwoyearsmaypresentcomplications,especiallyinIndonesiaandMalaysiaASEANislikelytofeatureprominentlyinworldwidemediaheadlinesinNovember.The31stASEANSummitwillbeheldonNovember12-13inManila,followedbytheEastAsiaSummit,whichincludesthe8regionalpartnersinvolvedinRCEP(theRegionalComprehensiveEconomicPartnership).PresidentTrump'sattendanceattheASEANSummitwilllikelyinjectadegreeofglobalrelevance,butwiththeregioncelebratingits50thanniversary,nowisagoodtimetofocusonanASEAN-specificstory.Inthispiecewelookatwhatmustbedonetoallowtheregiontorealizeitslong-elusivepotential.Inthepastwehavearguedthatenhancedintegrationisnecessarytorealizethebenefitsofalargeconsumermarketandproductionbase,inlinewiththeintentionsoftheASEANEconomicCommunity.Thisisatopicwewillrevisitsoon.ButinthiseditionofASEANPerspectiveswetakeamoregranularapproachbyidentifyingthetopthreereformsthateachcountryneedstorealizeinordertofundamentallyimprovetheGDPtrajectoryandallowittoreach,orsustain,potentialgrowth.Why3?Ultimately,allgovernmentshavelimitedpoliticalcapitalandconstrictingelectiontimelines,meaningtheywillneedtobestrategicwiththeirpriorities.Forexample,inIndonesia,c134millionvotersacross17provincesincludingmostofJavawillvoteinregionalelectionsinJune2018-whicharelikelytoserveasproxiesforpresidentialelectionsinApril2019.Anextendedcampaignperiodmayreducereformappetite.Meanwhile,inMalaysiapoliticalhurdlesaremoreimminent.ElectionsneedtobeheldbyAugust2018,withtheparliamentauto-dissolvingon24June.Therecentlytabled2018budget(Deliveringthebestofbothworlds,27October)includedvariouspro-consumermeasurestypicallyassociatedwithelection-yearbudgets,butahigherrevenuetargetwillallowthegovernmenttocontinuewithfiscalconsolidation.OpinionpollssuggestthattheBarisanNasional(BN)coalitionmayhavelostsomesupportovertheyears,butshouldnonethelesssecureamajorityofseatsintheupcomingelection(AsiaTimes,6October).Next,Thailandisexpectedtoholditsthrice-delayedgeneralelectionsinNovember2018accordingtoPrimeMinisterPrayuth,withadatetobesetinaroundJune(Bloomberg,10October).Oncetheyareheld,privateindustriesmayopttorealizelong-postponedinvestmentplans,therebyboostingoneoftheeconomy'sweakestlinks.InthePhilippines,PresidentDuterte'sgovernmentstillhassometimetoacceleratecrucialreformsbeforemid-termelectionsinmid-2019.Meanwhile,inVietnam,thingsarelesspressing:thenextkeypoliticalmilestonewillbethe13thPartyCongressin2021.31October2017JosephIncalcaterra,CFAEconomistTheH[e-mail][phone]NoelanArbisEcon[e-mail][phone]JingyangChenEcono[e-mail][phone]MaitreyiDasEconomicsAssociateASEANPerspectivesECONOMICSASEANWhenreformsmeetpoliticsECONOMICS●ASEAN31October20172TimetogettoworkAlthoughtheregionhasseenasharptrade-drivencyclicalrecoverythisyear,fromalonger-termperspective,ASEANisstillworkingtofulfilitsimmensepotential.Wehavecoveredthisfromvariousangles,especiallythebroaderintegrationstory(see:ASEANEconomicCommunity:Thenextlevelofintegration,November2015).Still,despitethehiccups,webelievetheregionremainsonapositivereformtrajectory,withvariousreform-mindedgovernmentsinpower,particularlyinthePhilippinesandIndonesia.InthePhilippines,achangeinfiscalpolicyhasallowedforasubstantialboosttoheadlinegrowthinrecentquarters,whileinIndonesia,structuralreformresultshavehadmoresubtlebutequallyimportanteffects,suchascontainingvolatileinflationbywayofsupply-sidereforms.Still,muchmoreneedstobedone.Wetakeacloselookateachcountrytoidentifythetopthreereforms,anddescribetheimplicationsandrelevantpoliticalconsiderations.Butfirst,itisimportanttonotethatthereareafewcommonthemesdrivingthereformoutlookacrosstheregion.1.InfrastructureIthasbecomeabitofaclichéinrecentyearstopointtoapick-upininfrastructurespendingasagrowthdriveracrossASEAN.Butthisverymuchremainsthecaseinjustabouteverycountryintheregion.WeforecastbroadGrossFixedCapitalFormation(GFCF)todrivegrowthinmostASEANcountriesthrough2019,mostprominentlysointhePhilippinesandVietnam.InTable2weshowbudgetinfrastructureallocationsasashareofGDPbycountry.InthecaseofIndonesia,Thailand,andSingapore,overallgrowthperformanceisfarmoredependentonpublicinfrastructurespendingandbudgetdisbursementduetosubduedgrowthinotherpartsoftheeconomy.InIndonesia,thecyclicalrecoveryhasleftmuchtobedesiredduetoweakloandisbursementandbelow-trendpr