For the full report with key themes, charts, and individual ASEAN-6 economic outlook, please download the PDF


In the past decade, ASEAN-6 has benefited from de-risking moves from US-China trade skirmishes, which led to a reconfiguration of the regional supply chain. This transition was further hastened by the pandemic. This period marked an increase in the share of ASEAN-6’s exports to global exports thanks to higher participation in varied sectors, spanning from electronics, advanced manufacturing, to resource-based and downstream industries.

Staying largely non-aligned, this region has benefited from a shift in productive capacity not only from China but also from other Northeast Asian and Western investors (ASEAN-6: Tailwinds from supply chain reconfiguration). We expect ASEAN-6 real GDP growth to average 4.9% in 2025, little changed from last year, but its resilience will be challenged by Trump 2.0 policies on trade, negative spillovers from slower Chinese exports, and a resultant slower capex outlook.

Steady sails but wary of cross winds

Growth

Throughout 2024, we witnessed more upgrades of ASEAN-6 economic growth projections than downgrades, as trade fared better than expected and the investment outlook was positive on domestic as well as foreign interests. For 2025, we are counting on a largely steady growth rate of 4.9% on aggregate for the ASEAN-6 region, backed by a pick-up in real purchasing power as inflation recedes, looser monetary policy conditions, and investment opportunities created by reverberations in the global trade order.

Our forward-looking proprietary export indicator points towards a positive outlook for trade in early 2025 (see chart in PDF), partly benefiting from a frontloading of orders before US-China or US-region tariffs are imposed. Trade reliant economies like Vietnam, Thailand, Malaysia, and Singapore are likely to feel the heat from any escalation in tensions between US and China. More domestic-oriented economies like Indonesia and Philippines are likely to experience a shallower impact, although we are mindful of material spillover effects on any direct tariff action. Of the two, Indonesia is relatively more vulnerable as China is not only the main export partner but also a key investor.

Besides tailwinds from pre-committed investments, national governments will continue to attract fresh interests by stepped up efforts to improve the ease of doing business and provide subsidies and tax holidays to edge out regional competition. We also see scope for more intra-regional initiatives as discussed later in the note.

Politics has been largely stable in the region in 2024, with Indonesia witnessing a change in the political leadership, and Singapore transitioning smoothly to the 4G leadership team, led by Prime Minister Lawrence Wong. Investors will be closely watching Singapore’s upcoming general elections that are due to be held by November 2025, while all other countries are likely to see their national governments safeguard growth and build guardrails in the face of a political change of guard in the US.

Inflation and monetary policy direction

Passage of supply side constraints and lower energy prices have pushed annual inflation way below 2022 highs and closer to the respective central bank targets last year. Malaysia and Thailand might be the exceptions where headline inflation is likely to rise modestly. In Malaysia, fiscal reforms, notably from subsidy rationalisation and other policies, are likely to push average headline inflation up, while base effects are poised to prop up inflation in Thailand for 2025. While headline inflation on a YoY basis has receded, the cumulative cost of living (calculated as the move in the CPI index; indexed to Jan 2022) has risen sharply. For instance, cumulative inflation is up by ~10% in Indonesia since January 2022, signalling significant pressure on households’ purchasing power.

Easing inflation has pushed real rates to strong positive territory, signalling that the regional central banks have room to make policy settings ‘less restrictive’ (see chart in PDF). While Vietnam had already started to lower policy rates to safeguard growth since 2023, the central banks of Philippines, Indonesia, and Thailand lowered rates in 2024. The US Fed’s decision to lower benchmark rates by 100bps from September 2024 through end-2024 also provided a conducive background.

However, a turn in the global environment following the US elections, signs of bottoming out in US inflation, and sharp rallies in the US dollar as well as yields muddied the regional monetary easing agenda. The ASEAN-6 currencies weakened by an average of -5.3% against the dollar in 4Q24 and -2.3% in full-year 2024, pushing the respective central banks to draw the brakes to their rate cut plans and err on the side of caution.

After hiking rates by the most amongst its peers in 2022-2023, the BSP continued to lower rates in 4Q24. Peso’s slippage in 2024 did not deter the BSP from cutting rates. Inflation averaged 3.2% YoY in 2024, within the 2-4% target range. The uptick in December’s inflation to 2.9% from Oct-Nov average of 2.4% was mainly driven by higher food, owing to destructive typhoons during that period. Barring that, price pressures were neither broad-based nor threatening at this juncture. Growth meanwhile has been on a softer footing, 3Q24’s 5.2% marked the slowest pace of increase in a year, pushing the World Bank to trim its GDP forecast for 2024. Notwithstanding US-led uncertainty, the BSP lowered rates in late-December, with the forward-looking path to factor in US Fed and its cautious posture.

For 2025, we expect a divergence in the monetary policy path. We forecast Malaysia, Thailand, and Vietnam to keep rates on hold, monitoring US-related developments especially on risks to trade and tariffs. Assuming the USD stabilises and provides relief to the regional currencies, we expect BI and BSP to lower rates by 50bps, taking a growth supportive role. For Singapore, inflation including the core metric is easing to the pre-pandemic averages, which provides some scope for the central bank to recalibrate monetary policy and slightly reduce the appreciation pace of the Singapore NEER (nominal effective exchange rate) policy band in 2025, alongside considerations of downside growth risks and uncertainties. Overall, monetary policy will be biased towards a data-dependent and cautious approach (we highlight scenarios in a subsequent section in the PDF).

Key themes for 2025

• Navigating downside risks from Trump 2.0
• Supply chain reconfiguration and China+1
• Greater intra-ASEAN collaboration
• US Fed scenarios and implications
• Building macro defences

To read the full report, click here to Download the PDF. 

Chua Han Teng, CFA

Economist - Asean

[email protected]

Radhika Rao

Senior Economist – Eurozone, India, Indonesia

[email protected]

Subscribe here to receive our economics & macro strategy materials.
To unsubscribe, please click here.