With weaker global growth and a downturn in the electronics trade cycle, Asean markets must rely on domestic demand to drive growth in 2019 — though the effectiveness of this driver will vary across countries, said HSBC economists in a note on Feb 13.

Regardless of how trade tensions between the United States and China develop, Asean export growth is likely to decelerate, given slowing global growth and headwinds in sectors such as commodities and electronics, they said.

However, fixed investment is set to slow in most countries due to higher interest rates, tighter domestic liquidity, changes in government policies/priorities, and political uncertainties. As a result, private consumption must be the main catalyst for growth.

The HSBC economists see this being the case in Indonesia, the Philippines and Vietnam this year. In Indonesia, private consumption should accelerate further thanks to higher welfare spending, lower oil prices boosting consumers’ discretionary budget, and a recovery in palm oil prices.

“Private consumption should also sustain growth in the Philippines and Vietnam despite potential headwinds from lower private investment and manufacturing activity, respectively,” they added, expecting higher consumption of basic consumer items, leisure, and transportation.

In Thailand and Malaysia, private consumption is expected to support growth, but there are risks and uncertainties. After breakneck growth fuelled by cash handouts, the repeal of the goods and services tax, and fuel subsisides, some normalisation is expected in Malaysia this year. In Thailand, the outlook depends on government spending ahead of the March elections, and wage growth vis-a-vis rising household debt.

In contrast, private consumption growth in Singapore may have already peaked, with unemployment rates edging up and wage growth likely to cool. A slightly expansionary stance in the upcoming Budget “should help support consumption at the margins, but the impact here will only be gradual”, added the economists.