The Association of Southeast Asian Nations (ASEAN) financial markets have demonstrated considerable stability, bolstered by capital flows and economic resilience, according to a recent economic commentary by Qatar National Bank (QNB). The analysis highlights the robustness of major ASEAN economies—Indonesia, Thailand, Malaysia, and the Philippines—in managing sudden changes in risk sentiment and capital flows.
QNB's assessment of the external vulnerability of these economies focuses on their external financing needs and the overall level of official foreign exchange (FX) reserves. Strong FX reserves are deemed essential for absorbing external shocks, and these reserves should be evaluated in conjunction with short-term external financing requirements and other macroeconomic indicators.
Thailand
Thailand remains particularly well-positioned to handle sudden changes in capital flows. Despite international tourism not yet reaching pre-pandemic levels, Thailand continues to run sizable current account surpluses. This has enabled the accumulation of $221 billion in official FX holdings, which covers 209 percent of the International Monetary Fund (IMF) reserve adequacy metric. This metric evaluates a country's FX reserves to ensure they can cover short-term external debt, potential trade imbalances, import costs, and capital flight risks, thereby maintaining financial stability and investor confidence.
Malaysia
Malaysia also exhibits resilience, being a major producer of manufacturing goods and commodities. The country consistently runs current account surpluses as a net exporter of oil and soft commodities. Although Malaysia has tighter reserve adequacy metrics compared to Thailand, its central bank holds $113 billion in FX reserves, covering 115 percent of the IMF reserve adequacy metric.
Philippines
The Philippines faces different challenges as a net external borrower with current account deficits. The country’s large trade deficit, partly offset by remittances from expatriates, is expected to amount to about 2 percent of its gross domestic product (GDP). However, the Philippines holds $103 billion in official FX reserves, covering 196 percent of the IMF reserve adequacy metric, providing a substantial cushion against external shocks.
Indonesia
Indonesia, traditionally the most exposed to external shocks among the large ASEAN countries, has returned to a current account deficit position after a brief period of surplus driven by a commodity boom. The country is expected to run a current account deficit of about 1 percent of GDP this year, with the deficit likely to persist due to ongoing capital expenditure projects. Indonesia’s official FX reserves amount to $136 billion, covering 112 percent of the IMF reserve adequacy metric.
Overall, the analysis by QNB underscores the importance of robust FX reserves and current account management in maintaining economic resilience and stability in the face of external shocks.