 "A worker adjusts an Asean flag at a meeting hall in Kuala Lumpur, Malaysia, October 28, 2021. Source: Reuters.")
Economic growth across Southeast Asia is poised for acceleration in 2025, with major Asean markets expected to post stronger growth as Asia retains its crown as the world’s fastest-growing region. According to a recent outlook report by the London-based think tank Asia House, Vietnam and the Philippines are set to remain the region’s brightest stars, while Indonesia, Malaysia, and Thailand also show promising growth trajectories.
Vietnam: Firing on all cylinders
Vietnam’s economy is forecast to grow by 6.25 per cent in 2025, up from 5.8 per cent in 2024 and 5.1 per cent in 2023. This makes Vietnam one of Southeast Asia’s most resilient economies. Strong domestic demand, rapid export growth, and the continued expansion of its digital economy will be key drivers behind this surge.
“Vietnam is likely to be a source of strength for its regional partners,” the report stated, highlighting the country’s growing digital economy and booming consumer base. With a flourishing urban landscape, the digital economy is projected to reach double digits, driven by the growing number of digital consumers and the nation’s expanding cities.
The Philippines: Powering on
The Philippines is also expected to maintain robust growth, supported by strong private consumption and growth in its service sector.
The country’s economy is likely to benefit from a moderation in inflationary pressures, which have been among the highest in Asia due to its reliance on imports.
“The slowdown in the global economy will likely have a limited impact, given the strength in the domestic economy,” the report added. As the Philippines heads into a general election in May, continued economic resilience will be key to sustaining this growth.
Indonesia: Pushing through headwinds
Indonesia, Southeast Asia’s largest economy, is forecast to grow at 5.5 per cent in 2025. This marks a rebound after two consecutive years of slower growth. However, Indonesia’s outlook depends on several factors, including continued export acceleration and diversification away from reliance on resource sectors like coal and palm oil.
“Indonesia will continue to be an economic leader in the region,” the report noted, crediting its resource-rich trade relationships with key trading partners like China for supporting growth in the face of global uncertainties.
Malaysia: Soon-to-be star performer?
Malaysia is projected to be one of the top performers in Southeast Asia, with a forecast GDP growth of 5 per cent in 2025. The country is on track to becoming a high-income economy by 2028, fueled by a solid service sector, a growing digital economy, and a robust trade balance. Malaysia’s firm external trade relationships and status as a digital e-commerce hub make it well-positioned to attract investment.
As the first country to establish a digital free trade zone, Malaysia serves as a hub for small and medium-sized enterprises and is expected to continue leveraging its platform for investment growth.
Impact Shorts
More ShortsThailand: Brighter days ahead
Thailand’s economic outlook is also looking brighter. The country’s forecast GDP growth of 3 per cent in 2025 represents a notable recovery from the previous years, with 2.7 per cent growth in 2024 and 1.9 per cent in 2023. Thailand’s transition into services and manufacturing offers resilience in the face of global economic slowdowns.
“The success of Thailand’s broader economy will depend on further growth in its digital economy,” the report explained, noting that regulatory measures promoting digital technologies, including AI regulation and cross-border data flows, will be key to its continued progress.
Rising Economic risks amid US policies
While Southeast Asia’s growth outlook is positive, external risks remain. The report cautioned that US policies under President-elect Donald Trump could heighten tensions, especially regarding trade imbalances. Countries with substantial trade surpluses with the US, like Vietnam, could face increased scrutiny.
“Over the next four years, US policies towards these countries pose a risk as Trump will likely want to tackle what he deems to be unfair trade,” the report noted, singling out Vietnam, where the US trade deficit exceeded US$110 billion in the first 11 months of 2024.
With inputs from agencies