In the second quarter 2024, the economies of Southeast Asia remained steadfastly resilient and broadly delivered credible economic growth, backed by an improvement in domestic and global demand.
Southeast Asia’s economies remained resilient and delivered credible economic performance in the second quarter 2024.1 GDP grew in all economies, with Malaysia, the Philippines, Thailand, and Vietnam recording the fastest rate of year-on-year (y-o-y) growth over the past four quarters. Indonesia experienced a growth plateau and Singapore grew 0.1 percent slower this quarter compared to the previous quarter (Exhibit 1). Growth drivers were nuanced in every Southeast Asian economy, across a combination of strong consumption, output expansion, and higher exports, following an improvement in global demand, especially in electronics.
The resilient second quarter performance provides hope for a continuation of positive economic growth in the region. Growth outlook will, however, remain subject to both external and domestic risk considerations. The fragile external environment continues to provide mixed signals and various ongoing challenges, including geopolitical conflicts, could pose challenges to Southeast Asia’s growth momentum.
Regional economic overview
In this article, we focus on the economies of six countries in Southeast Asia: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. We start by setting the scene with a regional overview.
GDP growth accelerated in four out of the six countries in the region—Malaysia, the Philippines, Thailand, and Vietnam—growing more in these countries in the second quarter alone than it did in the three preceding quarters. Indonesia held steady while Singapore’s growth in the second quarter was a whisker 0.1 percent less than the previous quarter. Strong performance across services and manufacturing sectors, particularly in electronics, helped prop up the region’s economy. The Philippines and Vietnam continued as the region’s top two performing economies, growing at 6.3 percent and 6.9 percent, respectively, with Malaysia coming in at third, having expanded by 5.9 percent.
Having turned a corner in the previous quarter, trade activities held up strongly in the second quarter 2024. This was driven by a strong global demand for chemicals and commodities, while the global tech upcycle boosted demand for electronics and consumer devices, which in turn supported the region’s exports momentum. Exports in all countries saw accelerated growth this quarter, except for the Philippines and Vietnam where growth moderated. Indonesia’s exports growth jumped from 1.37 percent in the first quarter 2024 to 8.28 percent in the second, while Malaysia’s exports growth more than doubled from 2.0 percent last quarter to 5.8 percent in the second quarter. Thailand saw a turnaround from a 1.1 percent contraction in exports last quarter to achieve a strong 4.5 percent growth this quarter, while Vietnam attained a double-digit growth of 12.5 percent this quarter, driven by strong exports’ performance in telephone, computers, electronics, and textile sectors.
While Indonesia and the Philippines saw a moderation in industrial output growth in the second quarter, there were positive performances that came from the rest of the region. Malaysia’s output growth more than doubled in the second quarter on the back of strong performance from both domestic and exports producing sectors, while Thailand marked the first quarter of output expansion, having contracted for the past six quarters. Vietnam’s output continued to expand at a faster pace, while Singapore saw smaller contraction of 1 percent this quarter. The region has benefited from stronger external demand from sectors such as chemicals and electronics. The PMI of all countries in the region grew or remained above the expansionary 50.0 mark, except for Indonesia which saw a first contraction in PMI for the past 34 months.
Labor markets across the region continued to remain strong, with unemployment in most markets improving or holding steady. Indonesia saw its lowest unemployment rate since 1997; similarly, the Philippines, which recorded its lowest unemployment in two decades, and Malaysia’s unemployment situation normalized to pre-pandemic levels. Improvement in business activities and continued investments into the region drove higher demand for labor and helped keep the labor market tight.
Inflation broadly eased, with the Philippines and Vietnam being the only regional outliers that saw higher inflation in the second quarter. The Philippines experienced higher food inflation, which led to July’s rate breaching the Philippines central bank’s target range for the first time in 2024. Vietnam first breached the 4 percent mark in April 2024 and its monthly inflation has since remained above this figure.
The majority of Southeast Asia currencies continued to retreat against the US dollar in the second quarter 2024. The Indonesia rupiah and Vietnam dong saw the greatest decline, while the Philippines peso fell to its weakest level since 2022. The Malaysia ringgit and Singapore dollar bucked the trend and held steady during the quarter. With signs pointing to a likelihood of a rate cut by the US Federal Reserve in the third quarter, all Southeast Asian currencies have seen some strengthening since July.
Central banks across the region continue to keep the policy rates unchanged, except for the Philippines central bank, which lowered its policy rate by 25 basis points. This was the Philippines’ first cut in nearly four years, and it became one of the first central banks in Asia to revise rates downward ahead of anticipated cuts by the US Federal Reserve in the coming months. For now, all other central banks are comfortable with their prevailing positions, which should support growth, keep inflation in check, and maintain a pro-stability monetary policy.