KUALA LUMPUR, July 12 (Bernama) -- Solid domestic demand and strength will drive the Asean economies for the rest of 2012, says Moody's Analytics.
The research firm said Asean remained a bright spot amid the downbeat global economy and the Asean 5 namely Indonesia, Malaysia, the Philippines, Singapore and Thailand, have shown resilience as strong investment and household spending have helped to cushion the impact of weaker global growth.
It added that investments in Southeast Asia is rising, which will lift productivity and long-term growth prospects while proactive monetary policy has helped shield the region from global disturbances.
"Exports are the traditional growth engine of the region, but even with the newest softening in global demand, economic growth has held firm.
"Investment and household spending is lifting domestic demand in Indonesia and Malaysia," Moody's said in a regional outlook note today.
The slowdown in export capped the regional gross domestic growth slightly below potential at five per cent, it added.
The firm said foreign direct investment in Indonesia surged 30 per cent year-on-year in the first quarter following a 25 per cent rise in the December quarter, while Malaysia's private investment has been solid, thanks to strength in mining and hard-commodity based chemical manufacturing.
"Public spending, especially infrastructure development, is also lifting Malaysia's growth," the research house said.
As for the Philippines, Moody's said the nation is enjoying a boost from government spending, as well as strong private sector investment in the services industry while Thailand has enjoyed a sharp first quarter recovery after a flood-driven contraction in the fourth quarter of 2011.
However, the company said Singapore has not fared as well, as its performance is more closely tied to the global economy.
"We expect investment to remain on a steady upward trend, expanding the region's potential output and long-term growth prospects.
"This optimism about local corporate and indeed about the broader economic outlook is reflected in the strong performance of local stock markets.
"Asean markets have consistently outperformed the Asian average and easily outshone their western peers since the 2009 global recession," the research firm added.
On inflation, Moody's said inflation has eased across Asean in line with moderating commodity prices, especially for oil.
With inflation now easing in most economies, it said the central banks have scope to loosen policy to help offset the external weakness.
"We expect the Bank of Thailand to reverse the emergency rate cuts in the coming months, moving rates into neutral territory, while the Philippines rate hikes are expected towards the end of 2012 as robust domestic activity starts to push the economy beyond capacity.
"Interest rates are likely to stay on hold through 2012 in Malaysia and Indonesia," said Moody's.