As the second half of the year begins, burgeoning Southeast Asian economies Indonesia and Vietnam are seeing positive signs of expansion, and the US-China Trade War continues to worsen.
Indonesia is relying on new tax incentives and upgraded infrastructure1 to attract more global manufacturers to the country. Starting next month, both domestic and foreign companies would receive a deductible tax of up to 200% for research and development (R&D) in the country. As Southeast Asia’s largest economy, Indonesia ventures to become a factory floor for the world amid the brewing US-China trade war.
In another region of Southeast Asia, Vietnam’s offshore loan market gains an upper hand2 as the US-China trade war intensifies. Businesses are shifting their supply chains away from China, allowing Vietnam to benefit from the shift in manufacturing capital. Local companies have been borrowing the most in six years in the offshore loan market, and the nation was one of the fastest-growing sources of American imports from Asia last quarter.
Under the latest coverage for the worsening US-China Trade War, China has targeted FedEx3 for being an ‘unreliable’ foreign company after a ‘wrongful delivery of packages’ that belonged to Huawei. Launching an investigation into the incident, Beijing appears to be warning foreign entities to not discriminate against domestic companies or risk being on the hit-list of ‘unreliable’ foreign firms.
Singapore is expected to be hurt the most among major South-east Asian economies4as fears of increasing tariffs between the US and China set in. Due to its export-dependent nature, Singapore’s economy is projected to fall from 3.1 per cent growth last year to 1.9 per cent this year, before improving slightly to 2.2 per cent in 2020. However, Singapore may see a silver lining in light of the CPTPP that opens new trade routes with Canada and Mexico.
On the other hand, the International Monetary Fund (IMF) anticipates no threat of global recession5 for 2019 and 2020. While the IMF expects to see decelerating growth, it is still growth nonetheless – 3.3 per cent at the end of this year, and 3.6 per cent in 2020. This is in addition to a strong US economy, which Singapore has trade relations with.
In light of trade tensions, uncertainty over Britain’s exit from the European Union, and uncertain recoveries in some stressed economies such as Argentina and Turkey, the IMF has stated that the global growth rates remain vulnerable to changes.
That’s all for this news round-up! See you in the next one.
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