Economic and Steel Industry Outlook in ASEAN

Posted on 05 May 2010

Source: SEAISI

Global economy showed a significant improvement across regions. Asia's emerging markets will lead the global expansion. In the long run, World Steel Association predicted in March 2010 that global GDP growth would continue to pick up till 2012 and maintain its momentum till 2014.


Source: World Steel Association

The US economy is projected to grow by 3.0% in 2010 and marginally improve further in 2012. Western Europe will remain under downward pressure while emerging Europe will face a slow recovery. On the other hand, Asia's economy is growing at a healthy pace. China has strong momentum entering 2010 with the growth rate of above 8% per annum. India will enjoy an increasing growth rate annually to above 8% in 2011. South Korea's GDP growth will pick up significantly in 2010 to nearly 4% and will remain at the same pace in 2011. Taiwan will follow the same growth pattern with expected growth rates of between 5-6% in 2010 and 2011.

Overall the ASEAN economy was strongly affected by the global recession, with average GDP growth rate of 1.2% in 2009, down from 6.5% in 2007. However, the global downturn had only a moderate impact on Indonesia's economy. The country's growth rate in 2009 was 4.5%, down from 6.3% in 2007. This was due to the slowdown in the first half of the year. However, its economy picked up in the third quarter and the growth accelerated in the fourth quarter, assisted by a pickup in exports and prices of export commodities, as well as by stimulatory fiscal and monetary policies. The Asian Development Bank predicted that Indonesia's GDP will rise to 5.5% in 2010 and about 6.0% in 2011. This is due to the national medium-term development plan implemented by the government. Growth may exceed this if the government can accelerate its budget on infrastructure investment.

Malaysia is one of the countries that has a trade-sensitive economy. Therefore, the economy dropped significantly by 6.2% in the first quarter of 2009 and maintained the pace of contraction before it registered a positive growth in the fourth quarter. For the full year, GDP contracted by 1.7% compared to a growth of 6.2% in 2007. It is predicted that the economy will rebound in 2010 as a result of growth in exports, driven by strong regional demand, particularly from China and inventory restocking by industrial countries. GDP growth is forecast to rebound to 5.3% in 2010 and to 5.0% in 2011.

Philippines' economy responded significantly to the economic meltdown. Its GDP growth in the first three quarters of 2009 declined substantially to register less than 1% per quarter. The growth picked up in the fourth quarter due to a rebound in industrial output. Significant government consumption spending and a fiscal stimulus package helped to support the country's economic growth in 2009. Remittances from overseas workers and private consumption remained the biggest contributor to GDP growth and registered an increase of 5.6% and 3.8%, respectively in 2009. However, investment and exports declined and dragged down GDP growth significantly. It is, nevertheless, predicted all factors will recover in 2010. GDP is forecast to increase by 3.8% in 2010 and further increase to 4.6% in 2011.

The world financial crisis has impacted deeply on an open economy country like Singapore. Its GDP growth began to decline since the first quarter of 2008 to the first quarter of 2009. Total trade in goods and services in volume terms fell by 12% in 2009, the sharpest fall in at least 3 decades. The recovery in the fourth quarter was due to a rebound in exports. The full year GDP contracted by 2.0%. However, it is predicted that Singapore will benefit from the V-shaped recovery in Asia, which accounted for about 60% of Singapore's total exports in 2008. GDP is forecast to increase to 6.3% in 2010 and to 5.0% in 2011.

In light of political tensions together with the impact from the global economic recession, Thailand's economy contracted steeply in 2009 and is expected to recover moderately in 2010. GDP growth in 2009 registered a deceleration of 2.3%. ADB forecast that Thailand's economy will recover in 2010 at a mild pace of 4.0% and pick up to 4.5% in 2011. However, this is based on the assumption that there will be no severe political disruptions in the next two years and that the problem in Map Ta Phut industrial estate on Thailand's eastern seaboard will be resolved soon.

Vietnam's economy faced a sharp deceleration in the first quarter of 2009, but the economy picked up rapidly over the rest of the year. Its GDP growth was 5.3% in 2009, down from 8.5% in 2007. ADB has projected Vietnam's GDP growth to accelerate to 6.5% in 2010 and to 6.8% in 2011. However, this is based on the assumption that the government will do the following: tighten monetary and fiscal policies further during 2010 to limit inflation and devaluation pressures, and keep the policies moderately tight in 2011.

ASEAN's apparent steel consumption is estimated at 42 million tonnes in 2009. Vietnam is the only country in the region that enjoyed a positive growth in steel demand with a significant increase in domestic output and import. Philippines's domestic steel demand registered a single digit deceleration in 2009 while the other ASEAN countries experienced steep double-digit declines in steel demand. World Steel Association forecast that the regional steel consumption will increase to 45 million tonnes in 2010 and expand to 49 million tonnes in 2011.

For a clearer picture of ASEAN steel industry and market development, join the 2010 SEAISI Conference & Exhibition in Ho Chi Minh City, Vietnam from 17 to 20 May 2010.

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