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Southeast Asia resists global stagflation amid rising tourism and exports

The war in Ukraine, record fuel and food prices and rising interest rates increase the threat of stagflation, but at least one region could avoid the worst of the downturn: Southeast Asia.

Investors around the world are selling stocks in anticipation of rising interest rates and a possible recession. The US Federal Reserve raised rates more than expected last week in an attempt to tame prices, while China’s punitive strategy to fight the coronavirus has sapped demand in the world’s second-largest economy.

However, Southeast Asia looks set to largely escape a stagflationary cycle of high inflation and production cuts. In four of the six largest economies of the Association of Southeast Asian Nations, gross domestic product is growing faster than inflation, a Financial Times analysis of government data showed.

In these countries — Vietnam, Malaysia, Indonesia and the Philippines — economies are bouncing back as strict pandemic entry controls are lifted and tourism resurgence fills hotels in hotspots, from Vietnam’s Halong Bay to Bali.

“What you are seeing in Southeast Asia at the moment is a re-opening rebound: the growth environment is very strong and this will likely continue into the second half of the year,” said Frederik Neumann, chief economist for Asia. at HSBC. “ASEAN looks very resilient.”

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“There is not much talk about stagflation here,” said Khun Goh, head of Asian studies at ANZ in Singapore. “One of the highlights is that the countries of Southeast Asia have embraced Covid as endemic and have really moved on and eased restrictions and opened up their economies.”

Only in Thailand and Singapore did inflation rise faster than the growth in gross domestic product. Thailand’s economy is recovering, but rising inflation is dampening consumer demand, with Singapore warning last month that its recovery is being slowed by the fallout from the war in Ukraine and lockdowns in China, its top trading partner.

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Across the region, positive numbers partly reflect the “base effect” of the recovery from deep economic downturns during the pandemic.

In the Philippines, which suffered one of the sharpest economic downturns of any country in the region following the imposition of tight restrictions to curb Covid, GDP rose 8.3% in the first quarter on a boost in consumption.

But the countries of Southeast Asia are also showing higher rates of output growth, including strong growth in exports. Rising prices for food, fuel and goods…

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