Singapore is probably the most prone 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.
Roslan Rahman | Afp | Getty Photographs
SINGAPORE — Asia won’t break out unscathed if the U.S. falls into recession, however some international locations in Southeast Asia will likely be extra badly hit than others, economists warn.
The tug-of-war between inflation and recession in the US 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 detrimental enlargement within the first two quarters of 2022 — what some believe a “technical” recession. Nonetheless, there is little consensus on when a full-blown recession may occur.
Economists advised CNBC that Singapore and Thailand will perhaps be the primary to be hit if the U.S. heads into recession.
Singapore
Singapore is “extra prone” to a U.S. recession when compared with its regional friends as a result of it is “very, very dependent,” stated Chua Hak Bin, a senior economist at Maybank.
“I believe [it] will likely be Singapore first,” he stated when requested which economies in Southeast Asia will likely be hit first if the U.S. falls right into a recession. The island-state might be the primary on account of its export dependency and its small and open economic system, Chua stated.
Selina Ling, leader economist at OCBC Financial institution agreed with that evaluation.
“In the beginning look, I’d suspect the extra open and trade-dependent Asian economies like [Singapore], Taiwan and South Korea and possibly Thailand will be the same old suspects,” she stated.
1. Interconnected
GDP enlargement within the nation has been “traditionally extra correlated” with the U.S. trade cycles because of its export-oriented economic system, Maybank stated in a late-August record.
Singapore does not have a lot of a home marketplace and is predicated closely on commerce products and services for financial enlargement, Chua defined. This contains transport actions and load operations.
The rustic’s trade-to-GDP ratio for 2021 was once 338%, in step with the Global Financial institution. The trade-to-GDP ratio is a hallmark of ways open an economic system is to world commerce.
Singapore’s “correlation and dependence on exterior call for may be very top,” Chua stated. If the U.S. had been to slide right into a recession, that “dependence and causality” will hit the extra export-oriented economies, he added.
Singapore is very attached with the remainder of the arena and a “surprise wave” in any nation will undoubtedly have a ripple impact around the metropolis, Irvin Seah, senior economist from DBS Staff Analysis advised CNBC.
Nonetheless, he does not be expecting Singapore to fall right into a recession this 12 months or subsequent 12 months.
The Maybank record stated that if the U.S. heads into recession, the downturn is “more likely to be shallow relatively than deep.”
Alternatively, Chua stated the U.S. may be able to face a “extended” recession and whether or not Singapore may be headed for a long-drawn recession or now not depends upon China’s Covid reopening since China is the city-state’s biggest buying and selling spouse.
2. Export-driven economic system
Singapore is a large exporter {of electrical} equipment and kit, however output in its electronics cluster fell 6.4% in July when compared with final 12 months, knowledge from the Financial Construction Board confirmed.
Output within the semiconductor sector dropped 4.1%, whilst different digital modules and parts segments shrank through 19.7% because of “decrease export orders from China and [South] Korea,” stated the EDB, a central authority company underneath Singapore’s commerce and trade ministry.
“China is the most important export marketplace for plenty of ASEAN international locations … However exports to China were horrible,” Chua stated referring the the 10-member Affiliation of Southeast Asian Countries. “As a result of Singapore is so closely depending on exports, [it] will really feel it.”
3. Tourism

Seah, the economist from DBS, stated he does now not “cut price the likelihood” that Singapore will revel in no less than one quarter of detrimental quarter-on-quarter enlargement. Alternatively, financial stipulations are normalizing for the rustic, he added.
“We’re undoubtedly a lot more potent as of late in comparison to all through the worldwide monetary disaster length,” he stated.
Thailand
Thailand can also be some of the first to be impacted if the U.S. falls right into a recession, predicted the economists who spoke to CNBC.
1. Tourism
The rustic is predicated closely on tourism for its financial enlargement. Vacationer spending accounted for roughly 11% of Thailand’s GDP in 2019 sooner than the pandemic. The rustic welcomed nearly 40 million guests that 12 months and generated greater than $60 billion in earnings, in step with Global Financial institution knowledge.
There have been simplest about 428,000 overseas vacationers arrivals in 2021, and its economic system grew through just one.5% — some of the slowest in Southeast Asia, in step with Reuters.
Thailand might be subsequent to fall right into a recession after Singapore, in step with Chua. Alternatively, a “wildcard” would be the timing of China’s reopening — which might resolve if the Thai economic system comes again “in complete swing,” he added.

Chinese language vacationers have now not returned to the Southeast Asian nation and that has left Thailand’s economic system in “an much more precarious state,” stated DBS Financial institution’s Seah.
“So long as Chinese language vacationers aren’t returning, Thailand will proceed to combat. Expansion has been vulnerable, inflation is top, [and] the Thai baht is underneath drive.”
The Thai baht is these days soaring at round 36 baht in keeping with U.S. buck, and is down 20% when compared with 3 years in the past, sooner than the pandemic.
2. Inflationary drive
Thailand’s inflation fee hit a 14-year top of seven.66% in June, in step with Refinitiv knowledge.
The Financial institution of Thailand has simplest hiked rates of interest as soon as thus far since 2018.
“Headline inflation may be very top in Thailand, however core inflation isn’t as top, through correlation isn’t as top. After all enlargement has been so much weaker, so they do not really feel any urgency to tighten as aggressively,” Maybank’s Chua stated.
He identified that Indonesia and the Philippines would most likely be much less impacted through a possible U.S. recession because of their “home orientated economies.”
“Indonesia and the Philippines were extra insulated from slowing exterior call for and US recession, with each economies proceeding to make bigger even in 2008/09 all through the worldwide monetary disaster,” the Maybank record stated.
Consistent with knowledge from the Global Financial institution, GDP enlargement in Indonesia and the Philippines had been upper in comparison to Singapore and Thailand all through the worldwide monetary disaster in 2008 to 2009.
— CNBC’s Abigail Ng and Weizhen Tan contributed to this record.