Southeast Asia’s six largest economies are projected to grow on average 4.8% annually over the next decade, but widening structural differences put them on increasingly divergent paths.
Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam face increasingly uneven growth prospects as gaps in institutional strength, energy security and technological readiness shape their ability to withstand shocks, according to a report by Bain & Company, DBS Group Holdings and Vriens & Partners released Wednesday.
Vietnam is forecast to remain the region’s growth leader, with Thailand as the laggard. The report singled out Malaysia for making the "greatest improvements,” citing its pro-investment stance and better governance and infrastructure.
Progress in Indonesia remains "mixed,” with infrastructure gains offset by lagging workforce development and policy inconsistency, while Thailand faces constraints from a tightening labor supply and weaker institutional momentum.
"Trade remains one of Southeast Asia’s greatest strengths and, perhaps, a potential vulnerability,” the report adds. Trade intensity stands at around 90% of regional GDP - more than double the global average - leaving the region particularly exposed.
The expected pace of growth over the 10-year horizon is projected slower than the group’s earlier 2024-34 forecast for an average expansion of 5.1%.
Malaysia, Singapore and Vietnam are set to capture "disproportionate upside” from favorable global conditions, helped by their roles in capital intermediation and manufacturing supply chains. Structural constraints are expected to limit the gains for Indonesia, Thailand and the Philippines, the report said.
Ultimately, while external forces will influence growth outcomes, they will still be "largely shaped by the ability of each country to build the institutional credibility, improve energy reliability, and leverage AI transformation to convert potential into sustainable growth,” Ravi Vijayaraghavan, senior partner at Bain & Company, said in a statement accompanying the report. - Bloomberg
