Southeast Asia is the next victim in the global economic struggle. The strengthened dollar, rising oil prices and a weakening Chinese economy are taking their toll on these emerging economies. Is there hope for these struggling economies and when will it change?
The strengthening dollar causes depreciation in local currencies making it less desirable for foreign investments and repaying foreign debt. Especially for companies that have borrowed in foreign currencies. Foreign direct investment slows down as investors seek safer havens in stronger emerging markets.
The weakening Chinese economy means less demand for ASEAN exports like raw materials and intermediate goods, leading to slower economic growth. As China is the major economic power in the region, international investors moving their investments out of China affects all economies in the region.
Also, higher oil prices, lead to higher energy prices which leads to banks raising interest rates to beat rising prices, which leads to inflation.
This dilemma should force ASEAN governments to implement sound economic policies and reforms to counteract these challenges. This means diversifying trade partners and their reliance on China and stimulating domestic demand and investment.
Global investors should closely monitor the economic and financial conditions in ASEAN nations. Diversifying their portfolios and incorporating risk management strategies with an independent financial adviser will be crucial in navigating these turbulent waters.