Southeast Asian Industry Gains Strength as 2010 Approaches

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Southeast Asian region is forecast to experience GDP growth of 4.3% in 2010, which will be a major upward movement from 2009, but significantly below the average rate of 6.3% in 2006-07. Growth in 2009 is projected to end up virtually the same as the 4.1% GDP growth of 2008.

The Asian Development Bank (Manila, Philippines) reports that countries that are less dependent on exports, including Indonesia, Laos, the Philippines and Vietnam, are riding out the downturn better than countries with significant amounts of exports. From mid-2009, countries with lower amounts of exported goods began to show a rise in manufacturing output, driven by increased domestic demand that was encouraged by government economic stimulus plans. Export-orientated economies, such as those of Malaysia, Singapore and Thailand, showed the greatest contraction in the region.

Higher oil and commodity prices in 2010 could benefit countries such as Brunei, Indonesia and Malaysia. Although the restocking of depleted inventories may provide international opportunities for exports, some countries in the region will import more than they export. Imports will include capital equipment needed to support public infrastructure investment programs.

During 2009, Indonesia saw a slight increase in manufacturing and mining activity. Import volumes fell below exports, although falling commodity prices diminished much of the benefits that would have been gained in stronger financial times. Efforts by the government to maintain relatively high levels of infrastructure spending in 2010, coupled with stronger international trade, will lead to a GDP of 5.4% for the year, stronger than earlier growth forecasts.

Malaysia saw all major sectors contract at the beginning of 2009, with the exception of a marginal increase in the services sector. The country's economy contracted 5.1%. The government's fiscal stimulus packages helped slow the decline, and growth should return by the end of 2009, possibly averaging 4.2% in 2010. In the Philippines, growth should inch up to an average of 1.6% for 2009, as public investment improves, and better all-round economic conditions could raise growth to 3.3%. Both of these countries have been subjected to a recent succession of floods and natural calamities that could sap resources and public confidence.

Singapore, a country generally viewed as a major predictor of regional economic trends, took a 9.5% hit in its GDP in the first quarter of 2009, and a further loss of 3.5% in the second quarter. With a comparatively strong recovery driven by pharmaceutical production and inventory-restocking in the second quarter, the total first half-year contraction was 6.5%. With continued gradual improvement, the full-year contraction is expected to be 5%, with 3.5% real growth in 2010.

A fall in exports and political volatility drove Thailand's growth down 6% in the first half of 2009. Financial moves from the government and central bank have subsequently pumped some life into the system, and the contraction should be contained to 3.2% for the year.

Vietnam experienced growth of 3.9% in the first half of 2009. Exports topped imports, and oil production rose. The overall expected growth rate for 2009 has been raised to 4.7%, and a GDP of 6.5% is forecast for 2010. Inflation remains a danger in the country, although the inflation rate dropped to 8.3% in the first half of 2009 from the dizzy 23% rate in 2008. The Asian Development Bank initially forecast an inflation rate of 6.8% in 2010 for Vietnam, but later increased this to 8.5%.

South East Asian Iron & Steel Institute (Selangor, Malaysia) reported that sales of long product (construction) steel rose 23% in Vietnam from January through August 2009, reaching 2.7 million tons. In September, sales of construction steel were expected to increase at least 12% following government economic targets. However, a lack of ready funding and foreign direct investment may put an indefinite stay on new steel production projects that planned before the economic slump. Such project delays are prevalent throughout Southeast Asia and are symptomatic of the global economic scenario, where demand, consumption and the availability of terms for finance are all jokers in the same pack.

Among the smaller economies in the region, Brunei should see growth of 2% in 2010 on the back of global energy demand and exports from the country's new methanol plant. Cambodia is hoping for 3.5% growth, after contracting 1.5% primarily because of a decline in tourism and clothing exports. With the expansion of mining and hydropower, Laos has 5.5% growth forecast for the year, rising to 5.7% in 2010.

MEPS (International) Limited (Sheffield, England) reports the occurrence of some price rises in steel products in the third quarter of 2009 in Asian markets. The industry analyst predicts larger rises in the first half of 2010. End-user consumption is likely to improve as the world emerges from recession. Government stimulus should help sales increase. Nevertheless, says MEPS, the global economic recovery is expected to be slow, and a return to the previous highs recorded in 2008 is not forecast.

China's steel inventories and production levels are the indicators that industries in Southeast Asia will be watching to better understand the directions that their domestic and international markets will take in 2010. At the moment, companies are focused on the short term, simply scouting out opportunities for business. The "green shoots" and "rays of hope" promised by a full economic recovery will come later.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.