Other BriefingsDun & Bradstreet: ASEAN Business Confidence Unfazed by Faltering Global Growth
Over the past decade, ASEAN has emerged as a critical destination for foreign investment. Increasing competitiveness, relocation of manufacturing from China, and accelerating regional integration have all played significant roles in helping to propel economic output to over 2.3 trillion dollars in 2015.
Although integration has seen significant harmonization within ASEAN, large differences remain between the regional bloc’s current members. In the face of deteriorating performance in China, those interested in tapping the region’s growing potential should be sure to evaluate member sates on an individual basis in order to ascertain optimal points for market entry. To this end, The ASEAN Business Optimism Index (BOI), released each quarter by Dun & Bradstreet, provides in-depth insight into business sentiment for the quarter ahead as measured by sales volume, net profit, selling price, new orders, inventory, and employment across countries, sectors, and industries.
In this article we provide an overview of prevailing business optimism trends within six ASEAN nations based on this quarter’s BOI, revealing surprising resilience in the face of regional economic upheaval.
Vietnam: Fast-Track Growth Takes a Pitstop
After two consecutive quarters of booming confidence, Q1 figures saw Vietnamese confidence decline from 45 percent to 25 percent. While pronounced, the severity of this slump can largely be attributed to cyclical corrections found annually during the first quarter. With successful conclusion of trade agreements such as the TPP, regulatory harmonization within the AEC, and continued relocation of low cost manufacturing from China, Vietnamese exports have avoided contractions found in other emerging markets, and confidence is projected to increase quickly in Q2.
The Philippines: Spring Fever for Business
Business confidence in the Philippines is living up to its position as one of the fastest growing economies within the region. The nation’s BOI stands as the highest within ASEAN – 66 percent – and, as of Q1, 70 percent of respondents have increased expectations for the near future. Driving increased confidence, new orders within the Philippines have increased by 16 percentage points during Q1, reaching 77 percent. While the bulk of these orders are rooted in mining and wholesale manufacturing, employment within the nation reached an all time high of 59 percent with broad based sectoral growth.
Singapore: Chips Down for Manufacturing
Q1 Business confidence in Singapore continues a downward trend as prolonged weakness in global demand cuts into new orders, net profits, and volume of sales. The nation’s overall Index figures slid to -2.93 percent from Q4, representing a 4.04 percent decline year-on-year. In the coming quarters, manufacturing – currently representing between 18 to 20 percent of Singapore’s’ GDP – will maintain high levels of exposure to slowing global demand and is projected to prolong strains on confidence. Despite these challenges, the nation’s strong consumer base and sound governance are expected to provide a level of mitigation to these challenges and help bolster business sentiment.
Thailand: Economic Stimulus Starts to Bear Fruit
In the face of concerns over prolonged military rule, business confidence in Thailand showed increased signs of resilience in Q1. Figures from the Kingdom reveal solid gains over previous quarters, representing the first signs of a concrete correction in over a yearlong period of decline. Supporting this turnaround are strong showings from sales volume and net profit figures, both of which increased from -12 percent in the previous quarter to 7 percent in Q1. The foundation for these trends stems from strong stimulus measures that, in addition to a weakening currency, have helped to bolster SMEs, support low income earners, and promote export growth.
Malaysia: Too Early for Green Shoots
Following a historic blow to confidence brought on by corruption scandals, deteriorating inflation, and slowing growth from China, Malaysian confidence showed signs of recovery in Q1, increasing from -14.4 percent to +4.8. The longevity of this turnaround is, however, far from certain. Although sales volume, net profits, and new orders showed increases compared to previous quarters, they are still far off from their positions in Q1 2015. Ultimately, Malaysia remains highly exposed to changes in sentiment and has some time to go before it truly bounces back from its current predicament.
Indonesia: Hands on Deck for a Better Outlook
Reversing several quarters of decline, Indonesia’s BOI rose from 27.8 percent in the forth quarter of 2015 to 34.6 percent in Q1. Although significant challenges remain, Indonesia has showed commitment to reforms in recent months, launching seven packages since mid 2015. Sales, new orders, and net profits have increased by 19, 18, and 16.7 percent respectively, making it clear that these changes have not gone unnoticed. Although slowing growth in China continues to present challenges for investors, the prospects for continued BOI improvement in coming quarters is strong.
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The ASEAN Business Optimism Index for Q1 2016 is out now and available as a complimentary download in the Asia Briefing Bookstore. |
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