Growth Prospects in ASEAN: Robust Growth Expected, but Higher Risks
Regional Outlook
The International Monetary Fund (IMF) has forecast growth for countries in ASEAN to be at a robust 4.6 per cent this year and 4.7 per cent in 2025, largely supported by strong domestic demand and exports.
Country-Specific Projections
- Indonesia, the Philippines, and Vietnam are projected to grow robustly (five per cent and above for the two years).
- Thailand’s growth is expected to remain more subdued (2.8 per cent growth in 2024 and 3.0 per cent growth in 2025).
- Malaysia’s real gross domestic product (GDP) growth has been revised to 4.8 per cent for this year and 4.4 per cent for 2025.
Inflation and Monetary Policy
- Average inflation is projected to drop to 2.2 per cent in 2024, before a mild resurgence to 2.6 per cent in 2025.
- In advanced Asia excluding Japan, disinflation is expected to continue, with average inflation of 2.5 per cent in 2024 and 2.3 per cent in 2025.
- In emerging Asia, average 2024 inflation is projected at 2.1 per cent, the lowest rate in almost 25 years.
- For 2025, inflation is expected to recover somewhat to 2.7 per cent, largely reflecting the gradual normalisation of inflation rates in China and Thailand.
Risks and Uncertainties
- The risk landscape has deteriorated since April, with worsening geopolitical tensions, China’s ongoing property market correction, and the possibility of more financial market turbulence.
- External demand could be weaker than forecast if the impact of past global monetary tightening is stronger than anticipated.
- Escalating international tensions and conflicts could impact Asia and the Pacific negatively, especially if there are spillovers to commodity and financial markets, or if tensions increase trade costs.
Monetary and Exchange Rate Policy
- Most Asian central banks kept policy rates on hold in the first half of 2024, reflecting concern about depreciation pressures.
- The recent downward shift in the US Federal Reserve’s interest rate expectations and start of its easing cycle have loosened this constraint and should grant Asian central banks more scope to adjust policy in line with domestic needs.
Conclusion
The IMF’s forecast suggests a robust growth outlook for ASEAN, driven by strong domestic demand and exports. However, the region is not immune to external risks, and policymakers should closely monitor geopolitical tensions, financial market volatility, and the impact of past global monetary tightening.
Frequently Asked Questions
- What is the IMF’s growth forecast for ASEAN in 2024 and 2025?
- 4.6 per cent in 2024 and 4.7 per cent in 2025.
- Which countries are expected to grow robustly in 2024 and 2025?
- Indonesia, the Philippines, and Vietnam.
- What is the expected inflation rate in 2024 and 2025?
- 2.2 per cent in 2024 and 2.6 per cent in 2025.
- What are the key risks and uncertainties facing the region?
- Worsening geopolitical tensions, China’s property market correction, and financial market volatility.