Singapore, Thailand are vulnerable to U.S. recession, economists say

Singapore is probably the most vulnerable and would be the first in Southeast Asia to get hit if the U.S. falls right into a recession, says Chua Hak Bin of Maybank.

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SINGAPORE — Asia won’t escape unscathed if the U.S. falls into recession, however some nations in Southeast Asia might be extra badly hit than others, economists warn.

The tug-of-war between inflation and recession within the United States continues because the Federal Reserve sticks to its hawkish stance on rate of interest hikes. 

The U.S. has already reported two consecutive quarters of unfavourable progress within the first two quarters of 2022 — what some contemplate a “technical” recession. Still, there’s little consensus on when a full-blown recession may occur. 

Economists instructed CNBC that Singapore and Thailand will most probably be the primary to be hit if the U.S. heads into recession.


Singapore is “more vulnerable” to a U.S. recession in contrast with its regional friends as a result of it is “very, very dependent,” stated Chua Hak Bin, a senior economist at Maybank.

“I suspect [it] will be Singapore first,” he stated when requested which economies in Southeast Asia might be hit first if the U.S. falls right into a recession. The island-state will probably be the primary due to its export dependency and its small and open financial system, Chua stated.

Selina Ling, chief economist at OCBC Bank agreed with that evaluation.

“At first glance, I would suspect the more open and trade-dependent Asian economies like [Singapore], Taiwan and South Korea and maybe Thailand would be the usual suspects,” she stated.

1. Interconnected

GDP progress within the nation has been “historically more correlated” with the U.S. enterprise cycles due to its export-oriented financial system, Maybank stated in a late-August report.

Singapore would not have a lot of a home market and depends closely on commerce providers for financial progress, Chua defined. This consists of delivery actions and cargo operations. 

The nation’s trade-to-GDP ratio for 2021 was 338%, in accordance to the World Bank. The trade-to-GDP ratio is an indicator of how open an financial system is to worldwide commerce.

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Singapore’s “correlation and dependence on external demand is very high,” Chua stated. If the U.S. have been to slip right into a recession, that “dependence and causality” will hit the extra export-oriented economies, he added.

Singapore is extraordinarily related with the remainder of the world and a “shock wave” in any nation will certainly have a ripple impact throughout town, Irvin Seah, senior economist from DBS Group Research instructed CNBC. 

Still, he would not anticipate Singapore to fall right into a recession this yr or subsequent yr.

The Maybank report stated that if the U.S. heads into recession, the downturn is “likely to be shallow rather than deep.”

However, Chua stated the U.S. may probably face a “prolonged” recession and whether or not Singapore can also be headed for a long-drawn recession or not will depend upon China’s Covid reopening since China is the city-state’s largest buying and selling companion. 

2. Export-driven financial system

Singapore is an enormous exporter {of electrical} equipment and gear, however output in its electronics cluster fell 6.4% in July in contrast with final yr, knowledge from the Economic Development Board confirmed.

Output within the semiconductor sector dropped 4.1%, whereas different digital modules and elements segments shrank by 19.7% due to “lower export orders from China and [South] Korea,” stated the EDB, a authorities company beneath Singapore’s commerce and trade ministry.

“China is the biggest export market for many ASEAN countries … But exports to China have been terrible,” Chua stated referring the the 10-member Association of Southeast Asian Nations. “Because Singapore is so heavily dependent on exports, [it] will feel it.” 

3. Tourism

Seah, the economist from DBS, stated he doesn’t “discount the possibility” that Singapore will expertise at the least one quarter of unfavourable quarter-on-quarter progress. However, financial situations are normalizing for the nation, he added.

“We are definitely much stronger today compared to during the global financial crisis period,” he stated. 


Thailand may also be one of many first to be impacted if the U.S. falls right into a recession, predicted the economists who spoke to CNBC.

1. Tourism

The nation depends closely on tourism for its financial progress. Tourist spending accounted for about 11% of Thailand’s GDP in 2019 earlier than the pandemic. The nation welcomed virtually 40 million guests that yr and generated greater than $60 billion in income, in accordance to World Bank knowledge.

There have been solely about 428,000 international vacationers arrivals in 2021, and its financial system grew by only one.5% — one of many slowest in Southeast Asia, in accordance to Reuters.

Thailand might be subsequent to fall right into a recession after Singapore, in accordance to Chua. However, a “wildcard” would be the timing of China’s reopening — which may decide if the Thai financial system comes again “in full swing,” he added.

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Chinese vacationers haven’t returned to the Southeast Asian nation and that has left Thailand’s financial system in “an even more precarious state,” stated DBS Bank’s Seah. 

“As long as Chinese tourists are not returning, Thailand will continue to struggle. Growth has been weak, inflation is high, [and] the Thai baht is under pressure.”

The Thai baht is presently hovering at round 36 baht per U.S. greenback, and is down 20% in contrast with three years in the past, earlier than the pandemic.

2. Inflationary stress

Thailand’s inflation fee hit a 14-year excessive of seven.66% in June, in accordance to Refinitiv knowledge.

The Bank of Thailand has solely hiked rates of interest as soon as up to now since 2018.

“Headline inflation is very high in Thailand, but core inflation is not as high, by correlation is not as high. Of course growth has been a lot weaker, so they don’t feel any urgency to tighten as aggressively,” Maybank’s Chua stated.

He identified that Indonesia and the Philippines would probably be much less impacted by a possible U.S. recession due to their “domestic oriented economies.”

“Indonesia and the Philippines have been more insulated from slowing external demand and US recession, with both economies continuing to expand even in 2008/09 during the global financial crisis,” the Maybank report stated.

According to knowledge from the World Bank, GDP progress in Indonesia and the Philippines have been larger in contrast to Singapore and Thailand through the international monetary disaster in 2008 to 2009.

— CNBC’s Abigail Ng and Weizhen Tan contributed to this report.


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