THE disruptions imposed by the war in Ukraine and the lockdowns in China are expected to slow the economic recovery in Southeast Asia but not knock it off track, with Indonesia and the Philippines tagged as outperformers, a Singapore-based analyst with Bloomberg Economics said. 

“We don’t expect recovery to be derailed because we have simultaneous pandemic reopenings helping to cushion the blow. Prior to China (lockdowns), ASEAN growth averaged 5.1%, only slightly less than the 5.3% projection in November,” Tamara Henderson of Bloomberg Economics said at a virtual webinar on Tuesday.

Ms. Henderson, who covers ASEAN for Bloomberg Economics, said Indonesia and the Philippines have more potential to post a strong recovery because they are “more domestic demand-driven.”

She said an element of their outperformance is the lag in the two countries’ economic reopening relative to the rest of the region.

Singapore and Thailand were identified as laggards because they “are seen as more vulnerable or are likely to register slower growth due to China’s prolonged lockdowns,” Ms. Henderson said.

She said Singapore has less reopening left to do and was more exposed to trade disruptions, while Thailand was reliant on Chinese tourism.

Ms. Henderson said that most countries were now adjusting to the pandemic.

“The good news is that the global weekly death toll is down, the lowest since March 2020 despite the emergence of new variants,” she said.

Bloomberg Economics said the economic reopening and unleashing of pent-up demand will underpin growth in the region.

However, not every economy in Asia is reopening, Ms. Henderson said, noting that China had yet to abandon its zero-COVID strategy.

“Its transition to living with COVID could take another year or even longer,” she said.

“As China reopens, we will see headwinds turn to tailwinds, but probably not a story for this year,” she added.

In Europe, the ongoing war between Russia and Ukraine will continue to hamper the global economic recovery, Ms. Henderson said.

“This is not the first time Russia has moved in on its neighbors; however, the impact is different because of the degree of sanctions on Russia, not without cost for the global economy,” she said.

The sanctions have been reflected in commodity price shocks, most notably in oil and grain.

“This is going to be more problematic for countries with a larger share of low-income households. It benefits commodity exporters; we have both of these in Oceania,” she added.

Ms. Henderson said that policy moves by the Federal Reserve remain closely watched by the market.

“In the US, all eyes are on inflation. The Fed is working to get its credibility back, and it may have to force a recession to get inflation under control,” she said.

Bloomberg Economics expects the Fed to press on with rate hikes until its funds rate goes to 3.5% by the end of 2022.

In Southeast Asia, she said that unless the central banks are moving more or less in step with the Fed, capital flows may become an issue.

“I don’t see all ASEAN central banks moving dramatically as the Fed this year,” she said. “However, the Philippines started its rate hike last week with inflation well above target.”

Bloomberg Economics said it is expecting the Bangko Sentral ng Pilipinas to hike by 200 basis points between 2022 and 2024. — Luisa Maria Jacinta C. Jocson