Indonesian wealth fund chief optimistic on ASEAN growth
In what has been described as a "polycrisis" of war, inflation, pandemic and market volatility, the Asian Financial Forum 2023 heard how investors are set to emerge from these crises stronger than ever.
“Humankind is a lot more ready for 2023,” said Dr Ridha Wirakusumah, chief executive officer of Indonesia Investment Authority (INA) - the country's $25 billion sovereign wealth fund - during his panel on the global economic outlook at the Asian Financial Forum 2023.
“We have been in such dire situations in the last few years, and we have become so much more adaptable and efficient," said Wirakusumah.
"We can deliver a lot more with a lot less, so we have a more positive view about the global economic outlook than a lot of our peers,” he added.
The Association of Southeast Asian Nations (ASEAN) economy experienced the highest GDP growth of 5.2% in 2022, ahead of the US, China, Japan and Germany according to the Organization for Economic Cooperation and Development (OECD).
As Indonesia accounts for more than 60% of the ASEAN population, the country has a large influence over its overall economic growth according to Wirakusumah.
“Indonesia has recorded over 10 quarters of trade balance surpluses as well as current account surpluses, which has been driven by the localisation or down streaming of a lot of our commodities,” he said.
“ASEAN in my view is poised to potentially grow even faster in 2023,” said Wirakusumah.
Entering 2023, the global economy faces multiple uncertainties and challenges, which include aggressive US interest rate hikes, intensifying geopolitical tensions and the rising threat of a recession, according to the panel of experts at the AFF 2023.
Amid these challenges, Mark Tucker, group chairman of HSBC Holdings PLC does not anticipate a foreseeable shift in Asia's prominent role within the global economy.
HSBC Holdings PLC
“The demographic challenges taking place, the accumulation of wealth due to the rapid growth of the middle class, urbanization, the shift to consumption, monumental improvements in connectivity, both physical and digitally—these are the fundamentals that have made Asia attractive, and which will continue for many years,” said Tucker.
Tucker emphasised that Asia’s investment story goes far beyond the attractiveness of Hong Kong and mainland China, pointing to India and the ASEAN countries.
“India is a hugely attractive market with a strong long-term outlook, supported by the demographic dividend provided by having over two-thirds of the population of working age, plus important reforms and rapid developments in the digital economy,” he said.
“Coupled with global supply chain shifts, and per capita GDP this could be a basis for a 20-to-30-year runway for growth, as was the case for China in the 1990s.”
The same is also true of Singapore, and across many ASEAN markets more generally, said Tucker.
“GDP growth in Vietnam was 8% in 2022, making it one of the fastest growing economies, not only in Asia, but across the globe. Asia's growth potential is much too great for the world to ignore,” he said.
EM PANDEMIC RECOVERY
Emerging markets had been hit much harder by the pandemic than advanced economies and within emerging markets, the low-income countries have been hit even further, said Dr José Viñals, group chairman, Standard Chartered PLC.
Standard Chartered PLC
“The higher interest rates in the United States and the high dollar is also leading to challenges in emerging markets and therefore the tightening of monetary policies is natural, not only as a means to defend against the imported inflation, but also in terms of avoiding significant capital outflows that might create big problems,” said Viñals.
Viñals believes that emerging markets will need to skilfully navigate a narrow path defined by the need to resume growth and stimulate private investment to aid their pandemic recovery.
Wirakusumah agreed but pointed out that it is important to not paint all these markets with the same broad brush.
“There are certain emerging markets that are blessed with large domestic markets, which are not as influenced by the global trade, and those with natural resources that are enjoying the commodity boom that we are experiencing today,” said Wirakusumah.
However, not all EMs have these resources, and these markets will need to focus on increasing their competencies to aid their recovery, he said.
It was for this reason that Indonesia spoke out at the last G20 and called for more cooperation between developed and developing nations. Through an alignment of their agendas, the transition goals of developed markets and the pandemic recovery of emerging markets could be achieved much quicker, according to Wirakusumah.
“The developed nations could actually export expertise and technology. If they are talking about renewable energy, for example, why not assist the developing nations with renewable energy technology right from the get-go, because some of the emerging markets don't even have electricity,” he said.