Further integration could lift growth of fast-growing ASEAN economies

The South Eastern economic trading block, also known as ASEAN, continues to post above 5% growth, reflecting the region’s stability and growing prosperity. While export remains strong, new intra-regional trade rules contained in the Blueprint 2025’ strategy, have the potential to boost projected growth by 1% annually to 2037.

The latest Economic Outlook report by accounting and consulting firm PwC explores current figures and projections for the world economy, as well as the theme of key developments in the ASEAN block, a region that has grown to encompass 10 countries since its founding*.
The ASEAN trading block has bucked the trend of a slowdown in trade growth, following key uncertainties flowing from market shifts, policy directions and fallout from the financial crisis. Today, the block is the third largest globally,  generating an economic output of $2.7 trillion, just behind the MERCOSUR region’s $2.9 trillion, but well behind the EU ($16 trillion) and NAFTA ($22 trillion). On the other hand, ASEAN lies on relatively stable ground compared to the EU, as concerns around Brexit are likely to see the loss of skilled immigrants, both in Britain and on the mainland.

Growing economic clout

The region’s economic growth has remained robust, even in light of the financial crisis  and a slowdown in the region’s most powerful economy, China. The ASEAN 10 saw growth increase by around 0.2% from the pre-crisis years (2000-09), with above 5.2% growth for the whole period, on average, since 2000. The figure is well above the global average (3.8%) and has been relatively stable over the period.

ASEAN's total GDP has grown from 1% of the global total to 3.4%. Today, the region has the third largest trading block population, totalling more than 635 million people, with the number of working aged people at around 430 million. The block has worked hard to improve trade between its members, with around 96% of tariff lines on intra-regional trade being brought down to zero in 2016. Meanwhile, the regional ‘Blueprint 2025’ strategy aims to develop a ‘deeply integrated and highly cohesive’ economy, with focus on the free regional movement of goods and people.

The ASEAN region’s exports remain relatively robust, accounting for around 7% or $1.1 trillion of total global export. This level of export places the trade-block at the number four spot, behind China (9%), the US (13%), and the EU (24%). 

While the region’s exports remain relatively strong, inter-regional export trade continues to flag behind that of similar blocks, with a value of just over $330 billion in 2016. The region’s internal trade is, following a recent slowdown, projected to increase steadily to 2037, hitting around $375 billion by 2025.

The study notes, however, that the effect of a more integrated ASEAN regional economic policy could add up to 1% annually to intra-regional export growth, boosting the projection to around $410 billion. The region’s economies remain relatively heterogeneous, however, which may see considerable differences in country specific changes to intra-regional export growth.

Economic focal points

In terms of the type of export that outperforms others, metals, machinery and transport continue to dominate in five of the economies, with growth in exports in 2016 topping 25%. Mineral & Chemical Products dominate the other five economies. Services saw low growth, while travel is a key export in a small number of economies. 

Commenting on the region’s fortunes, Barret Kupelian, a Senior Economist with PwC, said, “In the 50 years since its formation, the ASEAN has facilitated several free trade agreements that have helped the region become increasingly integrated, as they work towards the free movement of goods and skilled labour. If ASEAN policymakers can fully implement Blueprint 2025, the removal of barriers to further integration could see ASEAN become an even more significant global market.” 

* Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.