(TIS) – Indonesia has slipped below the Philippines in leadership of the Asean region in terms of growth, according to official figures and an analysis by credit ratings agency Standard & Poor’s.

TIS Analysis: TIS notes that the Philippines is currently in a more stable political environment than Indonesia, which is facing a major shift in leadership dynamic as the 2014 elections approach, along with a major change in the economic management paradigm, with the appointment of capable technocrats to the main economic management posts in Indonesia now a well-established trend – one that is not expected to change in the near future.

While S&P’s analysis has merit, TIS expects this to be a temporary shift in regional economic leadership, with ongoing demographic shifts in Indonesia – not to mention leadership changes at the sub-presidential level – to remain as the region’s main driver.

TIS notes also that a relatively significant proportion of the Philippines' above-print growth in the preceding quarter has been driven by government spending - not necessarily a reliable indicator of ongoing expansion.

TIS may be outside the consensus, but believes that its long-term forecast for Indonesia as the ongoing driver of the Asean economy will hold.

The following are two stories highlighting the shift in dynamic in the region: an analysis by S&P comparing Indonesia with the Philippines, and TIS’s report of Indonesia’s most recent economic figures.

The Philippines is now the leader in terms of growth among the major economies in the Association of Southeast Asian Nations (Asean), Standard and Poor’s (S&P) said in an economic research.
“The Philippines, which Standard and Poor’s recently upgraded to investment grade, has taken over the Asean growth leadership role from Indonesia,” it stated. 

S&P gave the country’s second investment grade rating in May from “BB+” to “BBB-“ and assigned a “stable” outlook on the country’s new rating. In terms of gross domestic product (GDP), the country grew by 7.8 percent in the first half of the year, the highest recorded economic expansion in Asean. This year, the ratings agency also projected that the Philippine gross domestic product will expand by almost 7 percent.

For 2014 to 2015, it said that the country’s growth may moderate by 6 percent to 6.5 percent, respectively.
Inflation, on the other hand, was projected at 3.1 percent in 2013, or at the lower end of the 3-percent to 5-percent target of the Bangko Sentral ng Pilipinas.

Meanwhile, S&P said that the major Asean economies such as Indonesia, Malaysia, Philippines, Thailand and Vietnam continue to outperform other Asia-Pacific countries. “These economies are more domestically focused than the Newly Industrialized Economies [NIEs] and therefore tend to do better when global growth is sluggish,” it said, referring to Hong Kong, Korea, Singapore and Taiwan.

In its baseline scenario, the ratings agency said that growth for Asean is expected to remain steady at about 5.5 percent this year until 2015. It added that growth will be at 6.1 percent for Indonesia, 5.3 percent for Malaysia, 5.3 percent for Vietnam and 3.9 percent for Thailand.

S&P said that Indonesia’s growth momentum remains strong, but financing the resulting current account deficit has become increasingly difficult. “Malaysia is also relatively open, but strong private and public investments, including infrastructure spending, are supporting overall growth,” it said.

It added that Vietnam’s growth has fallen significantly below potential, as the economy struggles with the stock of nonperforming loans and slow credit growth, while Thailand lags as it is relatively more trade-dependent. “The risks to growth within the Asean group are tilted modestly to the downside, but in a tighter range than the NIEs,” it stated.

(TIS) - Indonesia's economic growth continued to slow in the second quarter of the year, easing to 5.81%  from the same period a year earlier compared with 6.03% on-year growth in the January-March period, the first time economic expansion has fallen below 6% in nearly three years.

Quarter-on-quarter, gross domestic product grew 2.61% between January and March.

Friday’s data further underscore the likelihood of the missing this year’s target of a 6.3% economic expansion.

The country’s central bank recently shifted its focus from supporting growth to managing inflation amid persistent current account deficits.

“BI is focusing on managing inflation, exchange rate stability, and bringing the current account [deficit] into a manageable level,” central bank’s deputy governor Perry Warjiyo said after the data announcement.

“After we achieve those, we can then shift our focus to support growth,” he added.

The central bank, independent of the government, forecast this year’s economic growth to come in between 5.8% and 6.2%, slowing from 6.23% in 2012.