Where are ASEAN economies headed in 2024 and beyond?

The Association of Southeast Asian Nations (ASEAN) made notable strides in the pre-pandemic decade thanks to favorable demographics, improving infrastructure and manufacturing industries, and surging foreign direct investment. Nevertheless, the Covid-19 pandemic sparked supply-chain disruptions and travel restrictions that hit industrial and tourism activity in the region. In 2022–2023, ASEAN GDP growth notably outpaced the global average, boosted by ample stimulus packages, the gradual recovery of tourism and efforts by multinational companies to diversify global supply chains away from China. For a deeper dive into the outlook for ASEAN, download our latest special economic report on the region.

ASEAN GDP to accelerate in 2024

Rising tourist inflows, cooling inflation and the global electronics sector upturn should boost ASEAN GDP growth to above 2023’s rate in 2024. Nevertheless, elevated interest rates, fiscal consolidation efforts, the El Ni?o weather phenomenon and China’s subdued economy will keep regional growth below its 10-year pre-pandemic average. Beyond 2024, ASEAN will be the fastest-growing region in the world in the next decade thanks to FDI inflows, infrastructure development, favorable demographics and the expansion of consumer markets in key trading partners—particularly China and India. Meanwhile, potential democratic backsliding, climate change and extreme weather events, and geopolitical tensions between China and the U.S. will pose risks to growth.

Inflation to cool in 2024

Our Consensus is for regional inflation to ease from 2023’s average in 2024 on the delayed impact of previous monetary policy tightening, softer wage pressures, and subsidies and price controls in some countries. Nevertheless, spikes in global crude oil prices, geopolitical conflict, and food supply shocks due to the El Ni?o weather event and export restrictions cloud the inflation outlook. Due to their potential impact on the dollar exchange rate, the U.S. Fed’s monetary policy decisions are a key factor to watch in 2024.

Fiscal consolidation to remain a challenge this year

After years of generous stimulus plans amid the Covid-19 pandemic and the El Ni?o weather event, governments across the region will walk a tightrope between improving fiscal metrics and supporting domestic activity. Most regional economies are projected to maintain fiscal deficits above their 10-year pre-pandemic averages in 2024. Fiscal consolidation will be pursued mostly through higher taxes, while spending on both social assistance and infrastructure projects will be broadly maintained.

Insight from our analysts

On growth drivers in 2024, ANZ analyst Sanjay Mathur said: “Household consumption has been a key growth driver in the post-pandemic period in several economies in the region. A variety of indicators suggest that it is now past the point of maximum strength and a milder trajectory lies ahead. Slowing household consumption amid generally more conservative fiscal policies and stable private capital spending will increase the burden on exports to support overall growth.”

On regional trade this year, United Overseas Bank analysts commented: “We expect regional trade to recover and improve in 2024 thanks to post-supply chain diversification effects that became more apparent since 2018 and on the ongoing global tech upcycle. […] An escalation in geopolitical conflict could threaten the trade recovery with many key countries due to hold their presidential or general elections [this] year. Other downside risks to the trade outlook include an escalation in the Middle East tensions, tighter financial and monetary conditions for a prolonged period, a lethargic recovery in China amid ongoing property woes, and heightened US-China trade conflict that could tip the global economy into a recession.”

On the long-term outlook for ASEAN GDP, S&P Global analyst Rajiv Biswas stated: “The medium-term growth outlook for the ASEAN region remains very positive, underpinned by sustained expansion in private consumption in some of the largest consumer markets in Southeast Asia. […] Southeast Asia is also expected to become an increasingly important destination for foreign direct investment inflows, as multinationals diversify their supply chains to benefit from a growing number of competitive advantages in the ASEAN region.”