Navigating the Economic Growth Potential of Southeast Asia

Paya Martplakorn
Mar 6, 2024
2 min read

The Southeast Asian market is poised for significant economic growth, underscored by a myriad of contributing factors that hold promise for the region's future.

Last December, we visited our clients in Turkey, and part of our discussion was about the economic growth potential for countries in Southeast Asia. So here it is! We have summarised the key economic growth drivers as well as the GDP growth forecast for quick reference.

INDONESIA: Golden Indonesia 2045

The Indonesian economy continues to show strong growth. Goldman Sachs projects the country to become the world’s fourth-largest economy in 2050.

🇮🇩 Key Growth Drivers

Indonesia changes in fiscal, financial, and trade policies.

Anticipated adjustments in fiscal, financial, and trade policies are set to bolster government revenues, primarily attributed to the impact of tax reform policies.

New Capital City “Nusantara”.

The total cost of investment is expected to be about USD 32 billion by its completion in 2045 to accommodate 500,000 civil servants. In 2024 the government allocated about USD 2.7 billion to construction. The investment will boost the regional economy by 4-5 times with job creation about 4.3-4.8 million jobs in East-Kalimantan by 2045.

Indonesia continues to focus on sustainable economic development.

The government has launched the Golden Indonesia 2045 vision to boost its competitiveness by focusing on developing protection schemes, green economy sector including renewable energy, downstreaming industries related to mining and non-mining sectors e.g., minerals, plantation products, and marine products.

THAILAND: Navigating Recovery

Thailand's economy continues to navigate recovery from COVID-19 amidst global trade tensions.

🇹🇭 Key Growth Drivers

Government spending.

The Thai economy is poised for growth under the new government, with a 9.3% increase in the 2014 fiscal budget compared to the previous year. The government has unveiled THB 652 billion in new investment plans for 150 infrastructure projects, including motorway extensions and monorail lines, over the next two years. Additional proposals being considered are a one-off digital cash payout, a land bridge project linking the Gulf of Thailand with the Andaman Sea, new free trade agreements (FTAs), and green industry initiatives.

Export growth continues.

Thailand’s export sector has shown resilience despite global economic challenges with the 10% growth in January 2024, a continued growth for the sixth consecutive month. Exports are expected to grow at about 1% - 2% in 2025 as global economic recovery and demand for food security measures.

Thailand expects foreign arrivals to rise again.

The success of the government’s visa-free policy, which has been implemented since September 2023. This began with visa exemptions for visitors from China and Kazakhstan, which were followed by India and Taiwan in November led the number of international traveller to jump significantly (a 49% jump year on year for January and February as compared to last year). The Tourism Authority of Thailand (TAT) announced its 2024 target revenue of 3.5 trillion baht – 2.5 trillion from international tourists, and 1 trillion from domestic travellers.

SINGAPORE: Innovating, Connecting, Thriving

Revival in global demand, strategic partnerships, particularly with China, and continue to thrive in sectors like aviation, tourism, and electronics

🇸🇬 Key Growth Drivers

Recovery in global demand.

The electronic sector, precision engineering and wholesale trade especially for machinery and equipment continues to drive Singapore’s economic growth. Singapore also continues to expand its business collaboration into China as the second largest country after Malaysia where Singapore companies have an overseas presence in with the recent MOUs to advance bilateral trade and investment between both countries.

Strong rebound in air aviation and tourism industry

The aviation and tourism industries have experienced a significant rebound, with notable increases in visitor arrivals and expenditures from key markets such as Indonesia, China, Malaysia, Australia, South Korea, and the United States. This resurgence in tourism is largely attributed to enhanced global flight connectivity and specific initiatives, including the mutual 30-day visa-free travel agreement between China and Singapore, initiated on February 9, 2024.

Innovative hub especially for electronic products.

A major highlight is the establishment of Dyson's first proprietary new technology battery plant, which marks a significant investment in advanced manufacturing with highly skilled workforce, supportive government policies towards Industry 4.0 manufacturing, and a strong emphasis on research and development.

MALAYSIA: Resilient Economy

The Malaysia Government is going to speed up more growth-friendly policies to drive the economic growth

🇲🇾 Key Growth Drivers

Electrical & Electronic Exports to serve as growth driver.

E&E sector accounts for ~7% of Malaysia's GDP, with semiconductor devices and electronic integrated circuits constituting a quarter of the nation's total exports. In light of the global shift towards digitalisation, the semiconductor market is expected to experience growth, thereby enhancing Malaysia's export performance.

Implementing economic masterplans and Fiscal Responsibility Act (FRA) 2023.

The Malaysian government passed the bill to boost the country’s competitiveness — specifically manufacturing, halal goods and services, Islamic finance and foreign investment. From 2024 onwards, mega projects and government spending are anticipated to drive the economic growth. These include the Pan Borneo Sabah Phase 1B, flood mitigation, Penang light rail transit or LRT, Sabah-Sarawak Link Road and LRT3 reinstatement.

Higher FDI inflow especially to the technology sector.

Malaysia attracted notable foreign investment in hyperscale data centre project, solar production, 5G Innovation center, Automotive High-Technology Valley (AHTV), as well as AI infrastructure and supercomputer.

PHILIPPINES: Strong Growth Momentum

Philippines to be one of the fastest growing economies among the major economics in Asia

🇵🇭 Key Growth Drivers

Private Consumption and Structural Reforms.

The Philippine economy is projected to continue its robust growth, primarily fueled by strong private consumption alongside the continued implementation of structural reforms aimed at improving the country's macroeconomic environment.

Public Infrastructure Spending and Manufacturing Expansion.

Growth is anticipated to be supported by rising domestic demand, recovery in services especially tourism, sustained expansion in the manufacturing sector, and increased public infrastructure spending. The government aims to keep public infrastructure spending above 5% of GDP, focusing on high-impact projects to connect communities to markets and public services.

Macroeconomic Policies and Fiscal Frameworks.

The Philippine government is focusing on macroeconomic policies, including the Medium-Term Fiscal Framework (MTFF), aiming to reduce the fiscal deficit and maintain infrastructure spending as a percentage of GDP. These measures are designed to ensure fiscal stability and support economic growth.

VIETNAM: Optimistic Growth

Continue its economic growth momentum due to the continued investment in manufacturing sector especially in electronic products

🇻🇳 Key Growth Drivers

Free Trade Agreements and International Trade: Vietnam's participation in multiple free trade agreements, such as the CPTPP and EVFTA, will continue to provide competitive advantages in trade, enhancing its export sector and attracting foreign investment. The reduction of tariffs and non-tariff barriers through these agreements is expected to bolster Vietnam's export economy significantly.
Foreign Direct Investment (FDI): Continued strong FDI, driven by Vietnam's attractive investment climate due to competitive labor costs and a growing network of free trade agreements. This is further bolstered by global shifts in manufacturing supply chains, which have favored Vietnam as an alternative to China due to geopolitical tensions and supply chain diversification strategies.
Vietnam focus on construction to support its rapid economic growth. The country's 2030 master plan for transport infrastructure, which could be worth as much as $65 billion, includes the construction of 5,000 kilometres of expressways, a deep water port in Hai Phong, high-speed rail routes along major north-south arteries, and the completion of Long Thanh International Airport near Ho Chi Minh City.

CAMBODIA: Dynamic Expansion

Leveraging RCEP for diversified export growth in the automotive, electronics, and solar sectors, paired with developments in tourism and services

🇰🇭 Key Growth Drivers

Trade Agreements:

Participation in regional trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) is expected to boost trade, with increased market access and integration into regional value chains enhancing Cambodia's export potential.

Non-Garment Manufacturing

The sector is expected to remain strong, contributing significantly to the country’s economic growth. This includes diversification into light manufacturing such as electronics, automotive parts, and solar panels, which are anticipated to support industrial growth.

Service Sector

Anticipated to continue its growth, particularly in tourism, hotels, and restaurants, benefiting related sectors like wholesale, retail, and transport. The recovery in tourism is crucial, especially following the reopening of borders and improvement in global travel conditions.

LAO P.D.R.: Economic challenge

Navigating growth amid reforms and challenges - Addressing high debt, enhancing revenue, and expanding financial solutions for sustainable advancement

🇱🇦 Key Growth Drivers

Implementation Challenges.

Laos’ economy faced several challenges including high debt burden, poor revenue collection, limited financing options, and low foreign currency reserves are undermining development prospects. Though its economy is expected to be in growth phase, its progression depends largely on the government implementation of policy reforms and its ability to manage internal and external economic pressures.

Chinese Investment

China is the largest aid provider of Laos with Laos-China railway is set to continue its expansion, enhancing transit freight capabilities.

Renewable Energy Projects

Lao government has recently signed a Project Development Agreement (PDA) with Savan Vayu Renewable Energy (SVARE) to develop 1,200 MW wind power project which marks the largest wind power development in Laos to date.

Growth potential in service sector

Laos will assume the presidency of the Association of Southeast Asian Nations (ASEAN) during which numerous summits and related meetings will be held in Vientiane which could potentially boost the revenue in service sector.

MYANMAR: Structural Reform

The overall outlook for Myanmar's economy remains grim, with political instability and the pandemic preventing any rapid recovery.

Economic recovery falters as rising conflict, trade and logistics disruptions, withdrawal of major international investors to unemployment spikes, currency collapse, and internet blackouts, all contributing to an environment of heightened risk and uncertainty for businesses operating in Myanmar.

For more information about the data, please contact our Associate Business Analyst

Paya Martplakorn (Paya)

Associate Business Analyst

Email: pmartplakorn@canvassco.com