“ASEAN economy 2024 is recovering strongly, with manufacturing, exports, and increased FDI inflows becoming key growth drivers.”

ASEAN Economy 2024

Strong recovery driven by manufacturing and exports

OVERVIEW OF ASEAN ECONOMY 2024

In 2024, ASEAN’s economy is showing positive recovery signs after previous global economic disruptions. Maybank’s report titled “Year Ahead 2024: Green Shoots in a Fragmented World” highlights that economic growth in the region is becoming more balanced. Manufacturing and exports are experiencing a strong rebound, while previous growth drivers, such as tourism and post-pandemic “revenge spending,” are gradually declining.

Projections indicate that GDP growth for ASEAN-6 (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam) will rise from 4% in 2023 to 4.7% in 2024 and further to 4.8% in 2025. This reflects a significant improvement in manufacturing and trade activities across the region. Notably, the manufacturing sector is recovering rapidly, contributing to sustainable economic growth in ASEAN.

The real GDP of most ASEAN countries has surpassed pre-pandemic levels, except for Thailand, which remains dependent on tourism. The slow recovery of tourism, particularly from Chinese visitors, has affected sectors like hospitality, restaurants, and transportation. However, positive signals from exports and manufacturing are fostering renewed optimism for the region’s economic outlook.

MANUFACTURING AND EXPORTS – KEY GROWTH DRIVERS

Signs of Recovery in Manufacturing

In 2023, ASEAN’s manufacturing sector faced challenges due to weakened external demand, high inventory levels, and a shift in consumer spending toward services. However, since late 2023 and early 2024, the sector has shown strong recovery signals.

PMI (Purchasing Managers’ Index) indicators in several countries have returned above 50 points, indicating expansion in manufacturing. Countries such as Singapore, Indonesia, and the Philippines have reported rising production output, laying the foundation for sustained growth in 2024.

Notably, the electronics manufacturing sector has played a crucial role in this recovery. Singapore reported double-digit growth in electronics production for the first time in 17 months, while the Philippines’ exports reached a 10-month high due to increasing demand for electronic devices.

Key factors driving the manufacturing rebound include:

• Rising consumer spending in the U.S. and Europe, boosting demand for ASEAN-manufactured goods.
• A normalization of global consumer spending, with renewed demand for high-tech products.
• A new technology cycle, with upgraded and innovative products, attracts consumers.
• Reduced inventory levels in the U.S., enabling businesses to increase imports from ASEAN.
• Bottoming-out prices of chips and tech materials, stimulating production in the technology sector.

Exports on a strong growth trajectory

ASEAN’s exports declined significantly in 2023, dropping by 9.1% in the first half of the year. However, by Q4 2023, exports had shown substantial recovery. ASEAN-5 (excluding the Philippines) reported noticeable export improvements starting in October 2023.

Several key product categories have driven ASEAN’s export recovery:

• Electronic components: A major export for the Philippines, Malaysia, Vietnam, and Singapore.
• High-tech goods: Thailand and Vietnam saw a sharp increase in tech exports in Q3 2023.
• Electronic devices: The Philippines’ exports hit a 10-month high in September 2023.

The share of exports in GDP for some ASEAN countries remains high, emphasizing their strong dependence on trade:

• Singapore: 110% of GDP
• Vietnam: 91% of GDP
• Malaysia: 86% of GDP
• Thailand: 58% of GDP

Figure 2: ASEAN economy 2024 (Source: Internet)

FDI INFLOWS AND SUPPLY CHAIN SHIFT

A key factor driving ASEAN’s economic growth is the rapid increase in Foreign Direct Investment (FDI). Multinational corporations are shifting their supply chains away from China, making ASEAN an attractive destination due to competitive labor costs, well-developed infrastructure, and investment-friendly policies.

Countries benefiting the most from FDI inflows include:

• Vietnam – Emerging as a global manufacturing hub, attracting major investments from tech giants like Apple, Samsung, and Intel.
• Malaysia – A preferred destination for high-tech industries.
• Indonesia – Rising as a regional center for electric vehicle production.

As FDI moves from the approval stage to actual implementation, ASEAN stands to gain even more from the ongoing global trade recovery.

MONETARY POLICY AND INFLATION IN ASEAN

Inflation in ASEAN is expected to continue declining, from 3.6% in 2023 to 3% in 2024 and 2.8% in 2025.

Key factors contributing to lower inflation include:

• A 31% drop in oil prices from previous peaks.
• Stabilization of energy and food prices.
• A larger labor supply due to the return of migrant workers.

Regarding monetary policy, the U.S. Federal Reserve (Fed) is expected to maintain high interest rates for an extended period but may start cutting rates by Q3 2024. If the Fed reduces interest rates, several ASEAN central banks may also adjust their policies:

• Indonesia – Expected to cut interest rates by 75 basis points.
• Philippines – Potential rate cut of 75 basis points.
• Thailand – Likely to lower rates by 25 basis points.

Meanwhile, Vietnam and Malaysia are expected to keep interest rates unchanged to maintain economic stability.

Figure 3: ASEAN economy 2024 (Source: Internet)

CONCLUSION

In 2024, ASEAN’s economy is entering a phase of strong recovery, primarily driven by manufacturing and exports. The region’s diverse economic landscape, combined with increasing digital transformation and infrastructure development, plays a vital role in enhancing competitiveness and attracting global investors. The rapid adoption of renewable energy and green technologies also contributes to a more sustainable economic growth model.

While challenges remain, such as competition from other emerging economies, supply chain disruptions, and global trade policy uncertainties, ASEAN continues to solidify its position as a fast-growing and resilient economic region. The region’s commitment to regional integration, technological innovation, and sustainable development further strengthens its role in the global economy.

Additionally, ASEAN’s efforts to foster trade partnerships, promote digital economies, and invest in human capital development will play a crucial role in shaping long-term economic stability. With a manufacturing boom, rising FDI inflows, and stable monetary policies, ASEAN is set to remain a key economic powerhouse on the global stage in 2024. As the region embraces new opportunities and overcomes challenges, it holds significant potential to drive inclusive growth and contribute to a more sustainable future for its member states.

(Vn-Industry.)

Source: Compiled

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