S&P Global published the Southeast Asia (SEA) power and renewable market briefing for the fourth quarter of 2022 (Q4 2022). The report discussed the power demand, supply, pricing, and major market events in the quarter, as well as the latest proposed or enacted policies and regulations. The report is now accessible via Connect.

The data from the power market indicates a fluctuation in the year-over-year (y/y) power demand growth in the fourth quarter of 2022 in Southeast Asian countries, including Vietnam, Thailand, Malaysia, and Singapore, with a range of -3 y/y% to 7 y/y% compared to the previous year, reflecting a slowdown in the recovery of power demand. However, the average annual power demand in 2021-2022 demonstrates an improvement from 2021, ranging from 2.1 y/y% to 5.5 y/y%, signaling a shift away from the low power demand caused by the COVID-19 pandemic in the region. This improvement is attributed to the efforts of the Southeast Asian governments, such as the successful implementation of COVID-19 vaccination campaigns and "Living-with-COVID-19" policies, fiscal measures such as tax cuts and extended payment terms to support socioeconomic recovery, and the resumption of international activities like trade and tourism, which have all contributed to a rebound in power demand by 2022.

Vietnam's data is only available until October 2022, with a 7 y/y% increase in Q4 2022. Power demand growth appeared to be slower than in the previous quarter, owing to lower demand from major export markets. However, the overall annual power demand growth rate increased by an average of 5.5 y/y% in the first 10 months of 2022. This higher-than-pandemic growth rate indicated a strong economic recovery in the post-COVID-19 era. Thanks to its stable political environment and democratic society, an abundant and young labor force with competitive costs, and transparent investment policies and business incentives, Vietnam remains an attractive destination for international investors.

As the global economy slowed in Q4 2022, Thailand's power demand fluctuated between October and November 2022, with an average decline of 0.3 y/y%. However, the overall power demand rose by an average of 3.2 y/y% in the first 11 months of 2022 compared with the same period in 2021. Continuous growth in power demand indicated a post-COVID-19 economic recovery, with power data beginning to show a return to pre-pandemic levels in June 2022. Thailand's economy recovered at a slower-than-expected rate, reflecting the impact of the global economic slowdown, phase-out of COVID-19 relief measures and rising inflation.

Owing to the slowdown in global trade activities and inflationary pressures, Malaysia's power demand decreased by an average of 1.1 y/y% in Q4 2022 after a strong growth registered in the previous quarter. The Malaysian economy appears to be emerging from the shadow of the COVID-19-induced slowdown, as evidenced by the annual power demand increase with an average of 4.4 y/y%. In contrast, there are several uncertainties that continue to pose downside risks to the recovery of power market, including rising fuel costs amid tight supply and the Russia-Ukraine crisis that have disrupted the global supply chain, and reduction in trade volumes.

Similar to Malaysia's scenario, Singapore's power demand declined by 1.2 y/y% in Q4 2022 as a result of slower economic trade activities and weaker global demand. Nonetheless, the annual power demand maintains a moderate growth with 2.1 y/y%, indicating that Singaporean economy has continued to recover from the effects of COVID-19 pandemic, especially in the manufacturing sector that is supported by strong electronics exports. The pandemic also presents new opportunities for the country, as it brought new foreign direct investment (FDI) inflows into the vaccine manufacturing sector, made Singapore a major Asian hub for advanced manufacturing industry.

The power demand growth in Southeast Asia (SEA) during the fourth quarter of 2022 is facing a slowdown due to weak global demand. Despite signs of improvement in the ongoing pandemic, there is a risk that the region's high power demand growth rate may not be sustained, as supply chain disruptions and unexpected events are causing mounting price pressures. Furthermore, the upward trend in global commodity prices is exacerbating inflationary pressures, making the recovery path more uncertain and increasing the likelihood of risks in the near future.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.