Source – nationthailand.com
Southeast Asia’s Economic Outlook Brightens
A recent study from the Angsana Council, U.S. consultancy Bain & Co., and Singapore’s DBS Bank forecasts that Southeast Asia will outpace China in both economic growth and foreign direct investment (FDI) over the next decade. The “Southeast Asia Outlook 2024-2034” report, released on Thursday, projects that the region’s six key economies—Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam—will see their gross domestic product (GDP) grow at an average annual rate of 5.1%. This growth rate is notably higher than China’s projected 3.5% to 4.5% during the same period.
Vietnam and the Philippines Lead Regional Growth
Among the Southeast Asian countries, Vietnam is expected to experience the highest growth rate at 6.6%, followed closely by the Philippines at 6.1%. In contrast, Singapore is projected to have the slowest growth rate among the six, at 2.5%. Charles Ormiston, an advisory partner at Bain and chair of the Angsana Council, attributes this promising outlook to strong domestic growth and the region’s increasing appeal as companies diversify their production beyond China.
Southeast Asia Attracts More FDI than China
The report highlights a significant shift in FDI flows. In 2023, the six Southeast Asian economies attracted $206 billion in foreign capital, surpassing China’s $42.7 billion for the first time in a decade. Although the report does not provide specific future FDI figures, it anticipates that Southeast Asia will continue to attract substantial investment. Ormiston noted that both Western and Chinese investors are increasingly looking to Southeast Asia to bypass trade restrictions and security concerns.
Southeast Asia surpasses China in FDI for first time in a decade
Evolving Investment Dynamics and Growth Drivers
The ASEAN Secretariat’s data reveals that the U.S. was the largest source of FDI in the region in 2022, with $37 billion, primarily invested in manufacturing and finance. Japan followed with $27 billion, while China ranked third with $15 billion. Despite China’s current GDP being five times greater than the combined GDP of the six Southeast Asian economies, the report emphasizes that fostering a vibrant startup ecosystem and strengthening capital markets are crucial for supporting new companies and investments.
Looking ahead, Thailand and Indonesia are emerging as key players in the electric vehicle supply chain, while Malaysia, Singapore, and Vietnam are expanding their semiconductor production. The region is also seeing a surge in data center investments. However, the report warns that traditional incentives like low-cost labor and tax holidays are not sufficient to attract high-quality FDI. Instead, the availability of affordable, reliable green energy is expected to become a major driver of future investment as global companies pursue decarbonization goals.
Ormiston emphasizes that the shift towards sustainable energy sources presents one of Southeast Asia’s biggest growth opportunities, particularly as the region traditionally relies on gas and coal for power production.
