Source: Petroleum Institute of Thailand
By John Richardson
THERE is a lot of excitement about the self-sustaining nature of Southeast Asia’s (SEA) economy thanks to, for example, nine consecutive quarters of GDP growth of more than 6% in Indonesia and rising domestic consumption across the region.
But, as we discuss in this Insight article for ICIS news:
*THE SEA polyolefins industry is heavily dependent on exports (see the above chart, showing Thai polyproplyene exports, as an example). A big percentage of those exports are to China, which, of course, will see slower growth for next 2-5 years as its economy is rebalanced.
*Indirectly, the SEA petrochemicals industry feeds into local economies that are heavily dependent on exports and it is not only China that faces economic challenges. Eurozone growth remains very weak. To give one example of this dependence, The US Central Intelligence Agency’s (CIA) World Factbook valued Malaysia’s exports at $239.8bn in 2012 out of total GDP of $307.2bn.
*Some of the SEA economies are in the midst of credit bubbles, leading to rapid and perhaps unsustainable increases in property prices. Comparisons have been drawn to the build-up to the 1997-1998 Asian Financial Crisis.
And, as we discussed earlier on the blog, several SEA countries face the longer-term challenge of escaping the middle-income trap.
In this ever-more complex and interconnected world, taking for granted sustained strong growth in any of the emerging markets is a very risky approach.