Reuters
Jakarta

Stronger-than-expected growth in some Southeast Asian economies has sparked optimism the worst of a slowdown may be over, but high debt and weak exports make sustaining the momentum a challenge for policymakers as US interest rates go up.
The Philippines wrapped up the region’s third-quarter GDP performance on Thursday with annual growth of 6%, up from 5.8% in the second-quarter.
Annual growth also picked up in Indonesia and Thailand, the region’s two largest economies, taking weighted average growth in the region of some 500mn people with a combined GDP of $2.2tn to 4.2%, according to Capital Economics.
Officials from Bangkok to Jakarta have been quick to seize on the improved growth numbers and consumer confidence as evidence the worst slowdown since the 2009 crisis is over.
“We think growth in the third quarter is a turning point,” said Indonesian central bank Governor Agus Martowardojo.
Economists and businesses hold a less sanguine view.
China’s slowdown and recession in Japan, both leading markets for the region, high consumer and corporate debt at home and the risk of more market ructions when the US raises interest rates, are all clouding prospects ahead.
“It’s too early to call a trough,” said economist Joseph Incalcaterra at HSBC in Singapore. “We forecast growth in the fourth quarter to be weaker just about everywhere.”
Araya Sawaengwong, 48, who owns a small music shop in a Bangkok mall, said the economy was in bad shape.
“I’m struggling to sell my stuff as there are not many buyers these days. Buyers now become sellers competing to sell things but nobody wants to buy...I don’t think things are getting any better.”
Economic growth has been deceptively underpinned by a fall in imports rather than strength in exports for some countries.
Indonesia’s exports in the third quarter fell 0.7% from a year earlier, but external demand still contributed 1.2 percentage points to the economy’s 4.7% growth as imports tumbled by 6.1%.
Sliding prices of commodities that account for around half of Indonesia’s total exports have crimped incomes and depressed domestic activity, in turn, hitting imports.  “From an accounting perspective, this gives the appearance that growth is stronger than it actually is,” Incalcaterra said.
In Thailand, the external sector’s large contribution to the economy’s 2.9% expansion was mostly due to a drop in imports, as investment shrank for the first time since early 2014. Without the lift from net exports, Southeast Asia’s second-largest economy would have grown by just 0.1%.
Net exports dragged on Singapore’s performance, but it still grew 1.9% in the third quarter from a year earlier helped by spending on its 50th anniversary celebrations and a boost from inventories.
The data may show a growth pick-up in most of the major Southeast Asian economies, but exporters say there was no significant change in demand in the third quarter.
“We export to Asean countries and Australia and (demand in the) third-quarter was still pretty flat,” said Sancoyo Antarikso, director at PT Unilever Indonesia Tbk which exports consumer items such as shampoo and soap.
While additional monetary stimulus could still be deployed to bolster growth, policymakers are wary about capital outflows when US rates rise. There are also limits to what fiscal stimulus can do to counter sluggish global trade.
“Growth will remain weak for the next two quarters until we start seeing signs of a broader pick-up outside Asean,” said HSBC’s Incalcaterra.