Fixed-asset investment has also been strong in the region so far this year, while investors have been pouring into its equity markets and bonds, further shoring up economies as the global crisis drags on.
While not immune to a sharp or prolonged global downdraft -- Indonesian exports in June fell 16% from a year earlier -- the region has two considerable advantages over its more developed counterparts in the West: growing ranks of increasingly affluent consumers and governments with healthy finances and relatively low debt levels willing and able to spend.
The economic planning secretary of the Philippines was the latest official in the region to stress that policy flexibility yesterday after data showed the economy grew by a surprisingly weak 0.2% in the second quarter.
Manila will continue to accelerate public spending, particularly on infrastructure, to ensure full-year growth will be close to the high end of its 2012 target of 5-6%, Arsenio M. Balisacan told reporters.
While exports weakened in the quarter, along with those of the rest of Asia, Philippine consumer spending actually accelerated, thanks in part to legions of Filipinos working overseas, dutifully sending money home.
Banks’ loan growth leaped around 15% in June from a year earlier, indicating little softness in business or consumer confidence despite newspaper headlines warning of risks from slowdowns in Europe, the US and China.
From a year earlier, the Philippine economy grew a better-than expected 5.9% in the second quarter, weaker than the first quarter’s surge of 6.3% but still far stronger than most developed countries and some much larger emerging economies such as Brazil and Russia.
Riding a wave of strong domestic consumption, higher public spending and investment inflows, much of Southeast Asia was strikingly buoyant in the second quarter, with Indonesia, Malaysia and Thailand all posting stronger-than-expected economic expansions.
Tiny, trade-reliant Singapore, with no large domestic consumer base, has been the only outlier, struggling to avoid slipping back into recession.
While export data may not be pretty in coming months, economists say longer-term fundamentals remain strong enough in the region to continue attracting foreign investors, barring a further deterioration in global conditions or sudden capital flight.
"There is a re-rating going on in Indonesia and the Philippines, with Indonesia recently upgraded to investment-grade [credit] status and the Philippines right behind. Things have really clicked in those economies," said ING economist Tim Condon.
"Unless you get a September 2008-style global panic, there is enough resilience in these countries’ domestic demand to offset export weakness," Mr. Condon added.
Indonesia and the Philippines have been rare bright spots on international investors’ radar over the past year, with Jakarta regaining coveted investment grade credit status and Manila expected to follow in coming years. Thailand, meanwhile, has been steadily recovering from last year’s devastating floods.
Thailand’s benchmark stock index has gained nearly 20% this year, with Manila’s not far behind, while Indonesian shares are up 7% in 2012.
All those factors are giving Southeast Asian policy makers far more room to maneuver than those in the United States, Japan or Europe, though many remain wary of easing too quickly, risking a possible flare-up in inflation.
"In our book, deterioration in global conditions do argue for more monetary policy easing," said Vishnu Varathan, economist at Mizuho Corporate Bank in Singapore.
"Government stimulus will be crucial to pick up [any] slack in the private sector. Ability and willingness to spend are fortunately not a big issue; but getting the approved spending to work its way through the economy may still pose some challenges."
In the Philippines, government spending in the first seven months of 2012 -- excluding interest payments -- surged 15.2% from a year earlier, helping offset the impact of faltering exports and weaker farm output.
In Indonesia and Malaysia, the story is much the same: there are jumps in consumption as well as surging public and private investment.
Mr. Condon at ING expects Indonesia’s economy to grow by around 6% this year and the Philippines by 4.5-5%, with solid outlooks for 2013, but added that Malaysia’s trajectory may be more uncertain if the government ratchets back spending after coming elections, which are due by April.
Indonesia’s growth has been so robust, in fact, that the central bank recently publicly rejected concerns among some market watchers that the economy is overheating.
Some economists say the central bank will need to tighten policy by the end of the year to dampen surging demand for imports that created a record trade deficit in June. But most see pro-growth Bank Indonesia keeping record-low interest rates into 2013, to allow local consumption to keep the economy buoyant.
The government expects spending by a burgeoning middle class and foreign investment interest to keep growth at between 6.3-6.5% this year and to drive it higher to 6.8% next year.
Thailand is more of an enigma, with weak global demand biting deeper just as industry looks to fully recover from devastating floods in late 2011. The government reported on Wednesday that exports fell 4.46% in July from a year before as Europe’s debt crisis stifles demand. Even so, unless there is a sharp deterioration in the euro zone, Thai GDP is likely to see solid growth of 5.7% this year, according to the central bank. -- Reuters
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