The Southeast Asian economies staged a dramatic recovery in 2010 following the global financial crisis that swept through the region in 2008–09. The strength of the recovery underscores the region's resilience. With the recovery safely under way, the focus in the region has now shifted towards sustaining growth in the post-recovery era.

The regional recovery in 2010 can be roughly divided into two halves. The first half was characterized by a rapid rebound in several economies as inventory restocking, fiscal and monetary stimulus measures, and the general recovery in the global economy fuelled growth. By mid-2010, these stimulus measures and restocking activities abated. In the latter part of 2010, growth in the region began to moderate as the effects of restocking waned and the fiscal and monetary stance normalized. In addition, a growing sense of pessimism about the continued recovery of the global economy affected the region. This moderation in growth is expected to continue through 2011 as the regional economies move into their post-recovery phase.

Rapid Recovery in Southeast Asia in 2010

As the region entered 2010, hopes were high that the recovery that started in the fourth quarter of 2009 would continue. Predictions of recovery were realized as several regional economies posted double-digit growth rates in the first half of 2010. Singapore's stellar 18.2 per cent growth in the first half of 2010, in particular, stood out (Table 1). The strong regional growth performance was driven almost entirely by domestic demand with investment soaring and consumption picking up (Figure 1). Consumer confidence precipitated the upward trend in consumption spending as the fears of financial meltdown waned (Figure 2). Meanwhile, most of the high rate of investment growth was due to inventory restocking. During the uncertain economic environment of the global financial crisis in 2008–09 many firms retrenched stock orders. As a result of frozen inventories during this period, firms entered 2010 with dwindling inventories. When business confidence gradually returned, firms started ordering again and rebuilding their inventories.