Financial markets
Macroeconomic outlook
Foreign direct investment (FDI) flows slowed across the region, especially in Malaysia, the Philippines, and Singapore due to the global economic downturn. Meanwhile, the pause in interest rates has reduced the possibility of capital outflows; forex reserves in most Southeast Asian countries have grown as a result.
Capital flows
With inflation easing across all the region’s economies except Singapore and Vietnam, most Southeast Asian central banks have kept policy rates unchanged.
Interest rates
Currencies across the region weakened in the second quarter 2023—although most have strengthened against the US dollar since January 2023. The weakening was caused by rate hikes in the United States, narrowing interest rate differentials, and elevated commodity prices.
Currency
Southeast Asian economies have not been spared the global trend of rising inflation. However, despite remaining high, inflation has eased to within target range for all countries in the region, thanks to supply-side pressure in the energy sector and falling food prices.
Prices
The labor market remains stable post-COVID-19, with unemployment rates steadily dropping across all economies, except in the Philippines where seasonal employment is a factor.
Labor
Manufacturing output suffered from weakened global demand. The purchasing managers’ index (PMI) contracted in Malaysia and softened in the Philippines, Singapore, and Thailand—but still remained in the expansionary zone. Indonesia was the only country to expand PMI in the second quarter 2023.
Industrial activity
After rapid post-pandemic growth in 2022, trade shrank in the second quarter 2023 as weakening global demand contracted exports across most of the region. Singapore is one of the most affected economies given its high dependence on exports (at 187 percent of GDP in 2022), followed by Vietnam and Malaysia (at 94 percent and 74 percent of GDP respectively). The tourism sector, however, is accelerating as the number of foreign visitors to Southeast Asia continues to increase. This is particularly important for Thailand where tourism is one of their key sectors and, prior to the pandemic, contributed 20 percent to GDP in 2019.
Trade momentum
Mirroring the global downward trend in the second quarter 2023, growth slowed in three of the six countries’ economies—Malaysia, the Philippines, and Thailand—while GDP grew marginally in Indonesia, Singapore, and Vietnam, from the first quarter to the second. Private consumption was the key driver of growth in most of these countries, especially in Indonesia, Malaysia, and the Philippines, where their share in the economy ranges between 60 to 70 percent.
GDP
FDI flows decreased across countries
Most banks’ policy rates stayed unchanged
All currencies weakened
Inflation eased across economies
Unemployment rates decreased across countries
Output contracted in most countries
of Singapore’s GDP came from exports
187%
growth from consumers in some countries
60–70%
