Asia Monthly Presentation

Regional Overview: Indonesia And Malaysia Deep Dive

March 2023
Disclaimer

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK &

INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any
comments or data included in the report are solely derived from Fitch Solutions
Country Risk & Industry Research and independent sources. Fitch Ratings’ analysts
do not share data or information with Fitch Solutions Country Risk & Industry
Research.

2
Contents
• Asia Will Outperform On Growth Despite Most
Economies Seeing Slower Momentum
• Regional Macro Fundamentals Are Stronger Than
Elsewhere
• Deep Dive Into Malaysia And Indonesia
Asia Will Outperform In Terms of Growth
Asian Growth To Pick Up, While Global Growth Slows Mainland China’s Economy Leading The Charge
Real GDP Growth, % Real GDP Growth, %

Asia Global EM Asia EM Asia ex-Mainland China

8 10

8
6
6
4
4

2 2

0
0
-2
-2
-4

-4 -6
2015 2016 2017 2018 2019 2020 2021 2022e 2023f 2018 2019 2020 2021 2022e 2023f
Note: May include territories, special administrative regions, provinces and autonomous regions. e/f Note: May include territories, special administrative regions, provinces and autonomous regions.
= estimate/forecast. Source: Fitch Solutions e/f = estimate/forecast. Source: Local sources, Fitch Solutions

4
Growth Will Slow In Most Economies, Though Some Will Outperform
Growth Will Pick Up In Some Economies
Asia - Real GDP Growth, %

2022e 2023f
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
Vietnam Philippines India Mainland Indonesia Malaysia Thailand Singapore Australia South New Japan Pakistan
China Korea Zealand
e/f = estimate/forecast. Source: Fitch Solutions

5
Asian Macro Fundamentals Will Also Remain Relatively Strong
Inflation In Asia To Remain Much Lower Than Elsewhere Current Accounts To Remain In Surplus
Average Inflation, % Current Account Balance, % of GDP

2022e 2023f EM Asia DMs EMs

18 2.5

16
2.0
14
1.5
12

10 1.0

8
0.5
6
0.0
4

2 -0.5

0
Global EMs EMs ex-M.C.* EM Asia EM Asia ex- -1.0
M.C.* 2016 2017 2018 2019 2020 2021 2022e 2023f
Note: *M.C. = Mainland China. May include territories, special administrative regions, provinces and Note: . May include territories, special administrative regions, provinces and autonomous regions.
autonomous regions. Source: Fitch Solutions e/f = Fitch Solutions estimate/forecast. Source: Local sources, Fitch Solutions

6
Investment Flowing Back To Emerging Markets
Bond And Equity Flows Surging Rising Interest In Chinese Equities
Flows Into Emerging Markets, USDbn
Equity Flows Into Mainland China, USDbn

Equity Debt Total Mainland China Equity Mainland China Equity 3MM
100 20

80
15
60

40
10
20

0 5

-20
0
-40

-60 -5
-80

-100 -10

Feb-22

Feb-23
Oct-21
Nov-21

Oct-22
Apr-22
Dec-21

Jul-22

Nov-22
Dec-22
Sep-21

May-22

Aug-22
Sep-22
Jan-22

Mar-22

Jun-22

Jan-23
Oct-20
Oct-19

Oct-21

Oct-22
Apr-19

Apr-20

Apr-21

Apr-22
Jul-19

Jul-20

Jul-21

Jul-22
Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Source: IIF, Fitch Solutions Source: IIF, Fitch Solutions

7
Global And Asian Trade Cycle Will Continue To Come Under Pressure
Export Volumes Falling Faster Than Prices Trade Cycle Could Remain Weak
Global - Exports New Export Orders

Source: Macrobond, Fitch Solutions Source: Macrobond, Fitch Solutions

8
 Indonesia: Growth To Fall Slightly Below Trend
Slower Growth In 2023 Export Growth Well Past The Peak
Indonesia – Real GDP, % chg y-o-y (2008-2023) Indonesia – Exports, % chg y-o-y (2012-2023)

Actual FS Forecast Monthly Goods Exports, Values (3ma, LHS)*

7 70 35
6 60 30
5 50 *Latest = Feb. 2023 25
4 40 20
3 30 15
2 20 10
1 10 5
0 0 0
-1 -10 -5
-2 -20 -10
-3 -30 -15
-40 -20
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023
• Indonesian real GDP growth decelerated from 5.7% y-o-y in Q322 to • The latest evidence suggests that export growth is well past the peak,
5.0% in Q422, and we expect the economy to slow further in 2023. and we expect a more substantial slowdown to take hold in 2023.

• Our forecast is for economic growth to slow from 5.3% in 2022 to a • In addition, lower prices of key commodities, elevated inflation and
below-trend rate of 4.8% in 2023. diminishing policy support are likely to hold the economy back.

Source: Fitch Solutions Source: Macrobond, Fitch Solutions

9
Indonesia: Consumption Slowing, But Tourism Will Continue Improving
Retail Sales Slowing Tourism Arrivals Have Further To Go Before Normalising
Indonesia - Private Consumption & Retail Trade, % y-o-y Indonesia - Tourism Arrivals, % of 2019 Levels

Retail Trade (LHS) Private Consumption (RHS) Total China (Mainland)

120
30 10

25 8
100
20 6
15
4 80
10
2
5 60
0
0
-2
-5 40
-10 -4

-15 -6 20

-20 -8
Jul-19
Jul-14

Jul-15

Jul-16

Jul-17

Jul-18

Jul-20

Jul-21
Jan-22
Jul-22
Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Jan-23

0
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22
Source: Macrobond, Fitch Solutions

10
Indonesia: Bank Indonesia To Hike A Little Bit More
One More Hike Before A Pause Inflation Set To Come Down
Indonesia - Seven-Day Reverse Repo Rate, % Indonesia - Inflation, %

Actual FS Forecast Actual FS Forecast Upper/Lower Limit of BI Target

10 8

9 7

8 6

7 5

6 4

5 3

4 2

3 1

2 0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: Macrobond, Fitch Solutions Source: Local sources, Fitch Solutions

11
 Malaysia: Growth To Slow Sharply As Savings Drawdown
Savings Have Been Unwinding Rapidly Since April 2022 Sentiment Is More Downbeat Than 2022
Malaysia – Savings Deposits, MYRbn Malaysia – Manufacturing PMI & Business Tendency Survey

280000 Business Tendency Survey (LHS) Manufacturing PMI, SA, Index

260000 10 60
240000 5 55
220000 0
-5 50
200000
-10 45
180000 -15 40
160000 -20
-25 35
140000
120000 -30 30

Jul-20

Nov-20

Jul-21

Nov-21

Jul-22

Nov-22
May-20

Sep-20

May-21

Sep-21

May-22

Sep-22
Jan-22
Jan-20
Mar-20

Jan-21
Mar-21

Mar-22

Jan-23
Mar-23
Oct-18

Oct-19

Oct-20

Oct-21

Oct-22
Apr-18
Jul-18

Apr-19
Jul-19

Apr-20
Jul-20

Apr-21
Jul-21

Apr-22
Jul-22
Jan-18

Jan-19

Jan-20

Jan-21

Jan-22
• We expect Malaysia’s real GDP growth to slow sharply to 4.0% in • Investment growth will start to slow markedly due to rising borrowing
2023, from 8.7% in 2022. costs both domestically and globally; sentiment is turning increasingly
downbeat.
• Base effects will turn unfavourable in 2023 after Malaysia posted its
highest growth rate since 2000. Households and businesses have • Export growth will weaken as the reopening of Mainland China will be
already drawn down on their savings considerably since April 2022. insufficient to offset the impact of weaker global demand.
Source: Macrobond, Fitch Solutions Source: Macrobond, Fitch Solutions

12
 Malaysia: Monthly Indicators Showing Signs Of Weakness In Q123
Exports Weakened Further In January Industrial Production Growth Moderated Further As Well
Malaysia – Exports, MYRbn Malaysia – Real GDP & Industrial Production, % chg y-o-y

Source: Macrobond, Fitch Solutions Source: Macrobond, Fitch Solutions

Malaysia: Monetary Conditions More Accommodative Than Others
Policy Rates Lower Than Others… …As Inflation Is Better Behaved
Policy Rates, % Inflation, % chg y-o-y

Note: May include territories, special administrative regions, provinces and autonomous Note: May include territories, special administrative regions, provinces and autonomous
regions. Source: Macrobond, Fitch Solutions regions. Source: Macrobond, Fitch Solutions

14
Fitch Solutions
Country Risk
Vs Consensus
Fitch Solutions Macro Research Vs Consensus
2023 Real GDP Growth End-2023 Exchange Rate
% Currency

Currency Fitch Solutions Bloomberg Consensus Consensus Last Month

Market Fitch Solutions Bloomberg Consensus Consensus Last Month
Australia 1.94 1.70 1.70 USD/AUD 0.76 0.72 0.72
Bangladesh 6.47 6.45 6.45 BDT/USD 115.00 - -
China (Mainland) 5.04 5.30 5.30 CNY/USD 7.00 6.70 6.70
Hong Kong, China 3.78 3.50 3.50 HKD/USD 7.80 7.80 7.80
India 5.77 6.00 6.00 INR/USD 85.00 80.00 80.00
Indonesia 4.79 4.85 4.85 IDR/USD 15,600.00 14,900.00 14,900.00
Japan 1.28 1.10 1.10 JPY/USD 128.00 125.50 125.50
Macao, China 37.52 - - MOP/USD 7.99 - -
Malaysia 3.96 4.00 4.00 MYR/USD 4.35 4.24 4.24
Myanmar 2.51 - - MMK/USD 2,376.00 - -
New Zealand 1.08 1.50 1.50 USD/NZD 0.64 0.66 0.66
North Korea 1.00 - - KPW/USD 143.00 - -
Pakistan -0.30 1.50 1.50 PKR/USD 290.00 - -
Philippines 5.94 5.50 5.50 PHP/USD 57.50 54.00 54.00
Singapore 2.13 1.90 1.90 SGD/USD 1.32 1.31 1.31
South Korea 1.49 1.40 1.40 KRW/USD 1,200.00 1,225.00 1,225.00
Sri Lanka -0.95 3.00 3.00 LKR/USD 390.00 - -
Taiwan, China 1.39 1.90 1.90 TWD/USD 29.50 29.90 29.90
Thailand 2.99 3.60 3.60 THB/USD 30.50 33.25 33.25
Vietnam 6.55 6.00 6.00 VND/USD 23,700.00 23,400.00 23,400.00
Note: May include territories, special administrative regions, provinces and autonomous regions. Source: Bloomberg, Fitch Solutions. Last updated: February 16 2023

16
Fitch Solutions Macro Research Vs Consensus
2023 Average Inflation End-2023 Policy Interest Rate
% %
Market Fitch Solutions Bloomberg Consensus Consensus Last Month Market Fitch Solutions Bloomberg Consensus Consensus Last Month
Australia 4.80 5.50 5.50 Australia 3.85 3.95 3.95
Bangladesh 8.20 - - Bangladesh 6.50 - -
China (Mainland) 2.70 2.30 2.30 China (Mainland) 2.65 4.30 4.30
Hong Kong, China 5.25 - -
Hong Kong, China 2.25 2.40 2.40
India 6.75 6.05 6.05
India 5.10 5.25 5.25
Indonesia 6.00 5.75 5.75
Indonesia 4.50 4.00 4.00
Japan -0.10 0.00 0.00
Japan 2.80 2.30 2.30
Macao, China 5.25 - -
Macao, China 2.00 - -
Malaysia 2.90 3.00 3.00 Malaysia 3.00 3.00 3.00
Myanmar 18.00 - - Myanmar 7.00 - -
New Zealand 5.96 5.20 5.20 New Zealand 5.25 4.95 4.95
North Korea - - - North Korea - - -
Pakistan 30.70 23.65 23.65 Pakistan 20.00 15.40 15.40
Philippines 6.50 5.40 5.40 Philippines 6.25 6.00 6.00
Singapore 4.80 4.60 4.60 Singapore - - -
South Korea 3.40 3.30 3.30 South Korea 3.75 3.35 3.35
Sri Lanka 27.00 22.50 22.50 Sri Lanka 16.50 - -
Taiwan, China 1.80 2.00 2.00 Taiwan, China 1.88 1.75 1.75
Thailand 3.20 2.80 2.80 Thailand 2.00 1.90 1.90
Vietnam 4.50 3.80 3.80 Vietnam 6.00 6.40 6.40
Note: May include territories, special administrative regions, provinces and autonomous regions. Source: Bloomberg, Fitch Solutions. Last updated: February 16 2023

17
Data Pack
 6
8

0
2
4

10
15

-5
0
5

-20
-15
-10
Bangladesh
Singapore
Vietnam
Hong Kong,
China
Philippines
Taiwan, China
India
South Korea
Mongolia
Data Pack

Thailand
China
Japan (Mainland)
Indonesia
Vietnam
Malaysia
Malaysia
China Sri Lanka
(Mainland)
Pakistan
Indonesia
Growth Outlook

Australia Thailand

Sri Lanka Singapore

Current Account Outlook

Bangladesh Taiwan, China

India Australia
Average Real GDP Growth, % (2023-2027)

Pakistan South Korea

Average Current Account Balance, % of GDP (2023-2027)

Philippines New Zealand

Hong Kong,
New Zealand China
Mongolia Japan
55
60
65
70
75
-8
-6
-4
-2

-10
0
2

Singapore
Sri Lanka
South
Korea India
Taiwan,
China Pakistan
Thailand China
China (Mainland)
(Mainland) Vietnam
Malaysia
Bangladesh
Hong Kong,
China Philippines
Vietnam
Japan
2020

Bangladesh
Malaysia
Indonesia
Thailand
2025

India
Fiscal Outlook

Mongolia
Sri Lanka
Active Population, % of Total

Australia
Demographic Outlook

Mongolia Taiwan, China

Note: May include territories, special administrative regions, provinces and autonomous regions. 2023-2027 = Fitch Solutions forecasts. Source: Local sources, Fitch Solutions

Australia South Korea

Average Budget Balance, % of GDP (2023-2027)

Philippines Indonesia
New Hong Kong,
Zealand China
Pakistan New Zealand

Japan Singapore
19
 40
60
80

20
100

0
0
20,000
40,000
60,000
80,000
Singapore

South Korea
Singapore
Taiwan,
China
New Zealand
Data Pack

Australia Australia
Hong Kong,
China
Japan
New Zealand
China

Country Risk Score

(Mainland)
Malaysia
Hong Kong,
Vietnam China
Per Capita GDP

Indonesia

Thailand
GDP Per Capita, USD (2021)

Japan
Fitch Solutions Risk Indices

India

Philippines
South Korea
Operational Risk Score

Bangladesh

Mongolia

Sri Lanka
Taiwan, China
Pakistan
10
30
40
50

20
0

China
2,000
4,000
6,000
8,000

0
10,000
12,000
14,000

(Mainland)
Taiwan, China China
(Mainland)
Vietnam

Thailand Malaysia

South Korea
Note: May include territories, special administrative regions, provinces and autonomous regions. Source: Local sources, Fitch Solutions

Thailand
Malaysia

Bangladesh Indonesia

Indonesia
Mongolia
Singapore

Japan Sri Lanka

Manufacturing
Per Capita GDP

Philippines
Vietnam
Sri Lanka
GDP Per Capita, USD (2021)

Manufacturing, % of GDP (2022)

India Philippines

Pakistan
Bangladesh
Mongolia

New Zealand India

Australia
Hong Kong, Pakistan
China
20
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FS 16x9 2019 v15