Singapore’s reopening should attract foreign firms
Singapore, after topping IMD’s World Competitiveness Rankings in 2019 and 2020, tumbled to fifth place in 2021, largely due to COVID-19’s impact on the export and import of services and on people’s mobility.
It retained its first position in Asia, however, underscoring its enduring strengths across international trade, international investment, business legislation and technological investment.
With the pandemic likely to cause further supply chain disruptions and to restrict travel and tourism, the government is forecasting economic growth of 3-5% in 2022, down from around 7% in 2021.
However, its high vaccination rate – 88% of the population – should allow the government to ease domestic and border pandemic restrictions through 2022.
Unlike in Hong Kong, where foreign executives are increasingly unhappy at the government’s zero-covid policy and its accompanying entry restrictions for non-residents, Singapore’s pledge to reopen as far as possible should encourage foreign companies to strengthen their presence in the city.
India’s recovery to be fueled by consumption
India will continue its bounce-back in 2022. After seeing its economy shrink more than 7% during the 2020-21 fiscal year (running from April to March), it is recovering the lost ground with the Reserve Bank of India expecting 9.5% growth for 2021-22 and a consensus forecast of around 7.5% for 2022-23.
With the vaccination rate set to rise strongly, and household spending returns to pre-pandemic levels, consumption will be the main driver.
“The corporate outlook for next year is broadly positive for big companies in a position to benefit from the ongoing formalization of the economy, as small players fall by the wayside,” said Tom Miller, Senior Asia Analyst at research firm Gavekal.
That in turn, will support continuing strong inflows of foreign investment. The $64 billion that arrived in 2020 was the world’s fourth biggest total, behind only the US, China and Singapore. This funding will help India integrate into global value chains, in turn encouraging still greater inward investment.
But question marks remain over the progress of structural reforms. Long-awaited land reforms have been delayed ahead of state elections next year, while a climbdown on contentious farm bills shows that Prime Minister Narendra Modi is prioritizing short-term political payoffs over long-term economic benefits. “That will dismay domestic and foreign players alike,” said Gavekal’s Miller.
Malaysia will further embrace digitalization
Malaysia will outperform the rest of Southeast Asia in 2022, with GDP growing around 6% driven by consumer demand as the economy opens up again.
Playing a key role in this expansion are fiscal stimulus packages totaling more than $90 billion and online spending.
After increasing more than 90% from 2018-20, e-commerce revenues jumped 23% year-on-year in the first nine months 2021, according to government statistics. Further growth should take e-commerce revenues to $11 billion by 2025, the government predicts.
Pushing this expansion are Malaysia’s high Internet and mobile phone penetration rates: 80% of its 32 million population are online, and mobile subscriptions stand at more than 40 million.
“I think we’re at the brink of a really rapid shift to embracing a much more digital way of life,” said Imri Mokhtar, Managing Director and Group CEO of Telekom Malaysia, the country’s state-owned telecoms provider, at an IMD-organized virtual roundtable on Malaysia’s digital competitiveness held in November.
COVID-19 has played a major role in reshaping views, Mokhtar said, with the last two years seeing many people embrace new ways of working – first and foremost at small and medium-sized enterprises (SMEs).