RIYADH: Capital flows and economic resilience have positioned the Association of Southeast Asian Nations financial markets in a relatively stable state, according to Qatar National Bank. Â
In its latest economic commentary, QNB highlighted the robustness of large ASEAN economies — Indonesia, Thailand, Malaysia and the Philippines — against sudden changes in risk sentiment and capital flows. Â
QNB’s analysis focused on assessing the external vulnerability of these economies, examining their external financing needs and the overall level of official foreign exchange reserves. Â
The commentary noted that strong FX reserves act as a crucial buffer to absorb external shocks, and these reserves should be evaluated in context with short-term external financing requirements and other macroeconomic indicators. Â
Thailand remains well positioned to handle sudden capital flow changes, even with international tourism not yet back to pre-pandemic levels. Â
The country continues to run sizable current account surpluses, which have enabled it to accumulate $221 billion in official FX holdings, covering 209 percent of the International Monetary Fund reserve adequacy metric.
The IMF reserve adequacy metric assesses a country’s FX reserves to ensure they can cover short-term external debt, potential trade imbalances, import costs and capital flight risks, therefore maintaining financial stability and investor confidence. Â
Malaysia, a major producer of manufacturing goods and commodities, also shows resilience. The country has consistently run current account surpluses as a net exporter of oil and soft commodities. Â
Despite tighter reserve adequacy metrics compared with Thailand, Malaysia’s central bank holds $113 billion in FX holdings, covering 115 percent of the IMF reserve adequacy metric. Â
The Philippines, as a net external borrower with current account deficits, faces different challenges. The country’s large trade deficit, partially offset by remittances from expatriates, is expected to amount to about 2 percent of gross domestic product. Â
However, the Philippines holds $103 billion in official FX reserves, covering 196 percent of the IMF reserve adequacy metric, providing a significant cushion against external shocks. Â
Indonesia, traditionally the most exposed to external shocks of the large ASEAN countries, has returned to a current account deficit position after a brief period of surplus driven by a commodity boom. Â
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.Â
Indonesia’s official FX reserves amount to $136 billion, covering 112 percent of the IMF reserve adequacy metric.Â