Economic overview

Subdued economic growth in China will have an impact on economies in the rest of the region.

The International Monetary Fund (IMF) has revised its latest forecasts for China’s GDP growth downwards. The country’s GDP is now expected to grow by 6.8% in 2015, down by 0.3% from the previous forecast released in October. China’s manufacturing PMI fell below 50 in January, to 49.8. This means the sector contracted rather than expanded – the first time it has done so since September 2012. Falling output and lacklustre demand will affect the gas market. China’s gas demand is expected to grow at a relatively low rate in early 2015. 

Slowing Chinese growth will put pressure on the GDP of some of the region’s emerging markets. In its latest World Economic Outlook, the IMF has reduced its GDP forecast for the ASEAN 5 – Indonesia, Malaysia, the Philippines, Thailand and Vietnam – to 5.2% in 2015 and 5.3% in 2016. The Thai government’s estimates for growth in the country’s gas demand and LNG imports are closely linked to GDP performance. Thailand could import up to 5 mt in 2015, but if economic growth is weak it may only take around 3 mt. 

Although low oil prices will lower the cost of LNG - benefitting importers, the price of Indonesian and Malaysian LNG exports will be also be reduced, hitting revenue for both countries.

The IMF forecast for India’s GDP growth is largely unchanged from its previous outlook in October. The economy is expected to expand by 6.3% in 2015 and 6.5% in 2016. Industrial and investment activity in the country is expected to improve as a result of policy reforms. Additionally, India is expected to benefit this year from the decline in oil prices; the country’s gas sector – a traditionally supply-constrained and price-sensitive market – could take advantage of the lower price of LNG in 2015.