The prospects for Southeast Asia's exports - which have powered growth for decades - are looking bleak.
With global growth under pressure and the US threatening to turn more protectionist under Donald Trump, the outlook for the export-dependent region is faltering. Nations that are poised to handle the downturn best are those with growing consumer populations.
"With political support for free trade fading and antiglobalisation sentiment rising, Asia's export outlook in 2017 remains highly uncertain," said Khoon Goh, the Singapore-based head of Asia research at Australia & New Zealand Banking Group.
"Asian economies that are most dependent on exports will continue to underperform. Those that are more domestically focused, or derive a greater share of their exports from services, are likely to fare better."
Unlike in 2016 when central banks including in Indonesia and Malaysia unleashed stimulus to shield growth, the expectation of a strong US dollar and the threat of capital outflow may deter policy makers from cutting interest rates this time.
What to watch in 2017.
- The Philippines is anticipated to post the strongest growth of any major Asian economy in 2017, building up on a solid run in recent years.
"The Philippine economy starts 2017 from a position of strength and can better withstand the impact of rising external risks than most other countries in Asia," Nomura Holdings said.
"Domestic demand should remain the overarching driver, particularly investment spending, which we still expect to rise and offset the negative contribution from net exports," Nomura wrote in a report, noting that the Philippines may be the only country in Asia to hike interest rates in 2017.
• Vietnam, a low-cost producer, is one of the few economies in Asia still posting export growth. Foreign direct investment from China and elsewhere should keep driving output, but relatively high inflation, a large budget deficit and low foreign reserves remain a concern, said Beatrice Tanjangco, an economist at Oxford Economics.
"While posting a deficit is not necessarily bad, especially for a fast growing country like Vietnam, the deficit is driven by current spending while at the same time government investment has been falling," Tanjangco said. "With government debt close to the legal cap, room for maneuver is currently limited, calling for containment of current spending."
• Indonesia, which has the largest population in Southeast Asia, is expected to benefit from any recovery in commodity prices after its mineral and natural gas producers took hits in recent years. Capital outflows are a concern after the prospect of higher rates in the US recently triggered a sell off in Indonesian bond markets, and this may curtail policy options for the central bank if growth falters, United Overseas Bank Ltd. said.
"With the market looking for a faster pace of rate normalization in the U.S. next year and greater uncertainties in the euro zone, we believe Bank Indonesia will have limited opportunity to cut interest rates further," UOB said.
• Malaysia's economic growth has eased this year amid weaker exports and slower government spending. Financial markets remain highly exposed to a global turmoil with the Malaysian ringgit among the worst-performing currencies in Asia in 2016.
Malaysia's trade with the US is highly vulnerable to any possible US turn toward protectionism, as 74 per cent of its exports are machinery and transport equipment that the US may produce at home, HSBC Holdings Plc said. In addition, Malaysia's firms are closely linked with Chinese exporters selling products to the US, it said.
• Thailand is similarly exposed to the US market as it sells higher value-added products than neighbors like Vietnam, including cars. Like Malaysia, it's expected to hold a general election in 2017--anticipated to be in the second half of the year--and has been affected by political uncertainty capping domestic spending.
"The extended mourning period for a year following the passing of His Majesty, King Bhumibol Adulyadej, is likely to depress consumer sentiment and put a lid on consumer spending in 4Q16 and 1Q17," Morgan Stanley said.
• Singapore is anticipated to post the slowest economic growth of any country in the region, after its economy contracted in the third quarter of 2016 from the previous three months. The city-state faces a presidential election that must be called before August, which will serve to gauge popular support for the long-ruling People's Action Party.
"Faced with the onset of poorer economic prospects and job market, weaker consumer confidence had resulted in a collective 'tightening your belt' situation amongst residents," UOB said. "We hope that this does not start the vicious cycle where lower investments today results in lower potential GDP growth in the next period."