Southeast Asia becomes a growth pillar in the Asian region

The Asian Development Bank (ADB) said in its Asian Development Outlook report on April 11 that sustained growth in Southeast Asia and South Asia will offset China's economic slowdown and a slowdown in other subregions of developing Asia. Southeast Asia is forecast to grow 4.6 percent in 2024 and 4.7 percent in 2025, up from 4.1 percent last year.

The Asian Development Outlook also said Southeast Asia – comprising the 10 ASEAN member states and Timor-Leste – is expected to record accelerating growth, driven by robust domestic demand and a continued recovery in tourism. Southeast Asia’s growth is expected to offset China’s economic slowdown, driven by continued weakness in the real estate sector and a tepid recovery from the pandemic. Growth in the world’s second-largest economy is expected to slow to 4.8% in 2024 and 4.5% in 2025, down from 5.2% last year.

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Notably, within ASEAN, the Philippines and Vietnam are forecast to have the highest growth, with both countries expected to grow by 6% in 2024 and 6.2% in 2025. This compares to 5.6% last year for the Philippines and 5% for Vietnam. Growth in the Philippines, which is set to be the fastest-growing economy in Southeast Asia by 2023, is largely driven by services, led by retail trade and tourism.

ADB expects domestic demand to pick up and drive growth as government consumption increases while investment and household consumption increase thanks to falling inflation and loose monetary policy.

Meanwhile, Vietnam’s economy is expected to be buoyed by a recovery in growth in export-oriented manufacturing, services and stable agriculture. Other factors include positive foreign direct investment and remittance flows, a sustained trade surplus, continued fiscal support and a substantial public investment programme.

Going forward, the ADB expects inflation in Southeast Asia to decline and moderate in line with central bank targets. The Asian Development Bank expects Southeast Asia’s inflation to fall to 3.2% in 2024 and to remain at 3% in 2025. This compares with 5.3% in 2022 and 4.1% in 2023. The main reason is that the lagged effects of past tightening of monetary policy are finally being overcome, said ADB Chief Economist John Beirne.

Many Southeast Asian economies have reached the peak of their interest rate hike cycles, with multiple turning points, demonstrating the balance that needs to be struck between controlling inflation and supporting development. Labor market flexibility and the easing of supply constraints have also contributed to lower inflation across Southeast Asia.

Still, lower agricultural productivity, higher food prices, and currency depreciation could put upward pressure on inflation. Unsurprisingly, inflation in Laos and Myanmar is expected to remain in the double digits amid continued currency depreciation. The Lao kip lost half its value against the US dollar in 2022 and fell another 16.3% last year. Meanwhile, political instability in Myanmar has reduced food production and supplies, shrinking agriculture and disrupting supply chains.

Looking beyond Southeast Asia to developing Asia in the broader context, inflation is expected to ease to 3.2% in 2024 and further to 3% in 2025, down from 3.3% in 2023. ADB Chief Economist Albert Park said regional inflation will continue to cool in all subregions except East Asia.

Tight monetary policy remains in place in most economies and will help combat inflation, supported by moderate global inflation and stable fuel prices. ADB defines developing Asia as comprising 46 economies across the Caucasus and Central Asia, East Asia, South Asia, Southeast Asia, and the Pacific. ADB publishes its annual economic forecasts in April, with brief and updated reports in July, September, and December.

Source: https://congthuong.vn/dong-nam-a-tro-thanh-tru-do-tang-truong-o-khu-vuc-chau-a-314245.html