Southeast Asia on the Rise: Economic Scale Predicted to Surpass Japan by 2029

Strong Growth

INTRODUCTION

Southeast Asia growth continues to impress, with an average rate of 4.7%. The region’s economy is projected to surpass Japan by 2029, marking a significant milestone in the global economic landscape, according to HSBC.

Southeast Asia Emerges as a Global Economic Powerhouse

A report by HSBC reveals that the combined economic scale of six Southeast Asian countries (Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam) reached approximately $4 trillion in 2023. This places the region as the world’s fifth-largest economy, following the U.S., China, Germany, and Japan.

The International Monetary Fund (IMF) predicts Southeast Asia to be the fastest-growing region globally over the next five years, with an average growth rate of 4.7%. Maintaining this pace, the region’s economy is expected to surpass Japan by 2029, remaining among the top five largest economies globally. At that point, India is anticipated to claim the fourth position, while Japan will fall to sixth.

Southeast Asia economic growth surpassing Japan

Growth Drivers: Innovation and Value Chain Expansion

Unlike other regions relying heavily on population growth, Southeast Asia’s development stems from quality-driven growth. HSBC highlights that the region’s share of the global population peaked at 8.59% in 2012 and is projected to decline to 8.33% between 2024 and 2035.

Instead, sustainable growth in Southeast Asia is fueled by innovation and deeper integration into global value chains. Over the past decade, five of the six regional economies (excluding Malaysia) have significantly improved their rankings in the Global Innovation Index. Notably, Singapore now ranks fourth globally in innovation.

Industry and Service Exports: Pillars of Development

The share of high-tech goods in Southeast Asia’s exports has steadily increased. While the region accounted for just 6.1% of global exports in 2005, this figure rose to 7.4% in 2023. Remarkably, in 2017, Southeast Asia surpassed the combined export market share of Japan and South Korea.

Among the countries, Vietnam is expected to exhibit the strongest export growth. Additionally, Indonesia is capitalizing on its abundant mineral resources and numerous free trade agreements to benefit from the electric vehicle industry.

Import and export of goods at Tan Vu Port – Hai Phong

Beyond goods, service exports are another bright spot for the region. Sectors such as finance, electronics, telecommunications, and business process outsourcing (BPO) are experiencing impressive growth. Singapore leads in financial services, generating $2.6 billion in export revenue last year.

Since the early 21st century, the Philippines has leveraged its young, skilled, English-speaking workforce to develop its BPO industry. Revenue from this sector rivals the country’s remittance inflows. HSBC asserts that Southeast Asia, alongside India, is well-positioned to lead the global service export trend.

Tourism: A Sustainable Growth Driver

In addition to industry and services, tourism plays a vital role in expanding Southeast Asia’s economy. Between 2007 and 2019, the number of international tourists to the region grew by an average of 7.1% annually. The global tourism market share of the six Southeast Asian countries also increased from 4.9% to 8.7%.

Singapore and Thailand have benefited the most from the tourism boom. Singapore has hosted the F1 Grand Prix since 2008 and major music events, including Taylor Swift’s super-concert series. Meanwhile, Thailand’s investment in luxury hotels has led to stronger tourism revenue growth than visitor numbers.

Famous tourist destination in Singapore Garden by the bay

Southeast Asia: A Free Trade Hub

Amid rising protectionism globally, Southeast Asia has emerged as a region promoting free trade. HSBC believes that with its open policies, the region will continue to grow in scale and global influence.

CONCLUSION

Southeast Asia is asserting its position on the global economic map through sustainable growth and strategic development. The combination of innovation, value chain expansion, and free trade promotion is the key to helping the region surpass major economies, including Japan. With its inherent potential, Southeast Asia promises to remain a vital driver of the global economy in the years to come.

(Vn-Industry.)

Source: Compiled

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