Titled ‘Economic Insight: South East Asia’, the survey attributes the growth to improvements in trade access, which has compensated for slowdowns with some key trade partners.
The country’s economy has also diversified with growth in non-textile industries.
The country remains the bright spark in the ASEAN economy with growth accelerating to 6.7% in 2015 as foreign direct investment (FDI) reached record levels and export growth stayed strong despite low commodity prices.
Based on the prediction, the survey says Vietnam’s economy will continue to roar ahead in the coming years while the rest of ASEAN with the exception of Malaysia will experience moderate recovery.
In 2016, among six major ASEAN economies, Vietnam, the Philippines and Indonesia are expected to have the best growth prospects at 6.3%, 6.1% and 5.1%, respectively, it says.
“As ASEAN and global economies continue to struggle with the challenging backdrop, it is natural to question to what extent the rise of China and the commodity super-cycle were mistaken for structurally robust growth in some countries,” said Tom Rogers, ICAEW Economic Advisor and Associate Director, Oxford Economics.
“The best performers in the ASEAN-6 [Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam] will be economies where growth is underpinned by strong domestic fundamentals and where there is room for policy support.
“In this respect, we believe that Indonesia, the Philippines, and Vietnam have the best growth prospects among the ASEAN-6 countries, reflecting healthy domestic factors such as low debt, macro-stability and wage competitiveness. These factors will help them continue to gain market share in low-cost industries,” Rogers said.
The effect of slower growth in China will vary across the ASEAN nations, according to the report.
China is the largest trading partner for Malaysia, Singapore, and Thailand, and the former two countries are the most vulnerable to weaknesses in the Chinese economy due to their place in the regional supply chains for electronic goods.
The declining demand and prices for commodities will also be a cause for concern.
Indonesia, the Philippines and Vietnam are less exposed to manufacturing sectors where China has excess capacity.
Their wage competitiveness also means that developments in China should not significantly constrain their continued industrialisation.
“As ASEAN countries continue to reform their economies and experience moderate growth in the next few years, there will still be periods of financial market volatility as they adjust to China’s new growth trajectory,” said Mark Billington FCA, ICAEW Regional Director for South East Asia.
“A deeper-than-expected slowdown in China will be the key threat to ASEAN economies, along with more acute financial market volatility and a tightening of financial conditions as industrialised countries normalise monetary policy. This will be particularly painful for countries with high debt levels,” he added.
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