Goldman cuts Southeast Asia GDP forecast as delta variant spreads

SINGAPORE – Covid-19 infections are on the rise in several major economies in Southeast Asia, which has led Goldman Sachs to lower its growth forecast for 2021 for most of the region.

The spread of the more transmissible delta variant has pushed daily Covid cases to record highs in Indonesia, Malaysia and Thailand in recent weeks. This has led to tighter restrictions in Indonesia and Thailand, and an extension of restrictions in Malaysia, Goldman economists wrote in a note on Thursday.

In the Philippines, the spread of the coronavirus has made the relaxation of social distancing measures “more unlikely” this year, economists added.

Further viral outbreaks and tighter restrictions are expected to “weigh a lot more” on growth in the second half of 2021 than previously thought, economists said.

Goldman cut its growth forecast by more than 100 basis points for Indonesia, Malaysia and the Philippines. Singapore and Thailand saw less reduction from the bank’s share.

The rapid rise in Covid infections in Southeast Asia has come as immunization progress in the region – with the exception of Singapore – has lagged behind in many countries like the United States and the United Kingdom. United

Singapore has one of the fastest vaccination rates in the world, with more than 41% of its population fully vaccinated, according to the latest data compiled by the online statistics portal Our World in Data.

But the rest of the region is much slower: Malaysia has fully vaccinated 12.4% of its population while Indonesia has fully vaccinated 5.7% of its population, the data shows. Less than 5% of the populations in Thailand and the Philippines have been fully vaccinated against Covid.

Singapore, which tightened social distancing measures in early May, began easing restrictions last month. Goldman economists have predicted Malaysia will be next to follow suit in the fourth quarter, while other Southeast Asian economies will only follow suit in the first half of 2022.

Goldman said stronger global growth will benefit trade-oriented economies like Singapore and Malaysia the most. Malaysia, which is a net commodity exporter, is also expected to benefit from rising commodity prices, the bank said.

Meanwhile, “higher exposures to sectors like tourism, lower exposures to global trade, and limited political buffers are expected to lower sequential growth in Indonesia and Thailand, and maintain the rebound in sequential growth in the Philippines. more moderate than our previous expectations, ”he added.