That said, two markets are likely to buck the general downtrend for growth elsewhere in the region, by virtue of their being net exporters of key commodities.
Australia (4.4%) We have upwardly revised our 2022 growth forecast for Australia from 4.3% to 4.4%. Australia should benefit from the commodity upcycle, given that it is a net exporter of energy and commodities. Our expectation is that commodity prices will remain elevated due to supply disruptions and shortages as Russian exports are blocked from the international market due to sanctions.
Rising prices of iron ore (around 32% of Australia’s total exports) in particular are likely to boost overall exports and improve the trade balance. Indeed, spot prices traded around USD152/tonne as of the time of writing on April 26, 27.0% higher than the USD120.00/tonne at the start of 2022. Prices are likely to remain elevated over the course of 2022 given what we expect will be strong demand from China, which is likely to spend heavily on infrastructure in order to stimulate its economy, thereby supporting demand for iron ore.
Malaysia (5.6%) We also revised up our 2022 forecast for Malaysia, raising it from 5.5% to 5.6%. This mainly reflects the upside to its commodities exports, including petroleum related products and palm oil, which will boost both the trade balance and the fiscal resources at the government’s disposal. Budget 2022 was formulated assuming oil prices would average just USD67.00/bbl, compared to our Oil & Gas team’s USD100.00/bbl forecast. We estimate that if oil prices do in fact average USD100.00/bbl instead of USD67.00/bbl, the government would stand to gain another 1.3% of GDP in revenue. That said, some of this additional revenue will have to be spent maintaining fuel and food price subsidies that the government has implemented to tamper inflation. Malaysia, which accounts for around a quarter of global palm oil exports, is also likely to benefit benefit from the ban on palm oil exports imposed by Indonesia, which accounts for around 55% of global palm oil exports, on April 25.
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