Financial markets
Macroeconomic outlook
Southeast Asian countries continued to build on the positive momentum of the previous quarters, with most economies seeing higher foreign direct investment (FDI) in the fourth quarter. Malaysia experienced its highest quarterly FDI inflow in 2024, while Indonesia’s grew more than 30 percent in this quarter on a year-on-year basis. Southeast Asia attracted investments in sectors including automotive, electronics, mining, and services (such as information and communication [ICT] and finance), with each country developing clear strength and value propositions in specific sectors over others. The continued strong performance bodes well for the region as an investment destination as businesses continue to reassess and reconfigure their global operational and supply chain footprints.
Key indicator details can be found in Exhibit 2.
Capital flows
Malaysia’s and Vietnam’s central banks were the only ones in Southeast Asia to have maintained their policy stance in the fourth quarter and into the first two months of 2025. Other central banks in the region have loosened their policy rates, with the Philippines and Thailand cutting their rates twice as they urgently sought to stimulate demand in their economies. Further rate cuts have not been ruled out by most central banks as they look to ensure their economies hold up in the face of macroeconomic uncertainties while balancing to keep inflation and monetary conditions stable.
Interest rates
Southeast Asian currencies tumbled against the US dollar in the fourth quarter, reversing gains seen in the previous quarter. Escalating trade tensions could result in US policy rates being kept at the same level for longer, providing a boost to the US dollar. The Philippines peso and Vietnamese dong hit record lows in the fourth quarter. Meanwhile, the Malaysian ringgit, despite its depreciation in the fourth quarter, emerged as one of the few currencies in Asia to strengthen in 2024.
Currency
Inflation further eased across the region in the fourth quarter, except for the Philippines and Thailand, which both saw higher inflation attributed to increases in food and energy prices. In 2024, inflation moderated across all countries except for Vietnam, which experienced a minor 0.1 percent increase. Prices appear to have stabilized, with inflation rates within each respective country’s target inflation rates or at levels deemed acceptable.
Prices
Labor markets remained resilient in the fourth quarter, with labor demand and participation in Southeast Asian markets having recovered to pre-COVID-19 levels. Levels of unemployment improved in the fourth quarter in most countries in the region, except for Malaysia and Singapore, where both remained unchanged but close to the lowest level recorded in the past ten years. New jobs continued to be added to the markets, although job gains in some countries were slower than in the previous quarter. While the labor indicators may have appeared robust overall, developing markets such as Indonesia and the Philippines remained dominated by people working in the informal sectors, necessitating efforts to improve the employment rate in the formal sector.
Labor
Industrial activities showed mixed expansion across the region. Indonesia and the Philippines recorded stronger growth in the fourth quarter, while the rest of the region grew at a slower pace. The technology upcycle, coupled with strong local and foreign demand in areas such as food and beverage, mining, and transport engineering, helped support manufacturing output in the region. Likewise, the Purchasing Managers’ Index (PMI) provided mixed readings. PMI for Indonesia and the Philippines reentered the expansionary territory for the first time in the fourth quarter since November 2017 and June 2024, respectively, while Singapore’s PMI was at a six-year high. Malaysia and Vietnam were in the contractionary zone because output growth and new orders were expected to slow as business sentiments dampened, given the uncertain macroeconomic conditions.
Industrial activity
Trade broadly continued its robust trajectory. Indonesia recorded stronger exports growth in the fourth quarter, while Thailand continued its turnaround story to achieve its strongest exports expansion in 11 quarters. Exports in the Philippines rebounded, having contracted in the third quarter, while Malaysia, Singapore, and Vietnam saw their exports growth moderate in the fourth quarter. Overall, in 2024, Southeast Asia experienced strong trade growth, supported by demand from key trading partners such as China and the United States, particularly in electronics, which benefited from the global technology upcycle. Imports strengthened too following an increase in local demand for intermediate and capital goods to support industrial production and investment activities.
Trade momentum
The region’s economy held up and ended 2024 on a steady note, with all countries but Thailand achieving 5 percent GDP growth or more in the fourth quarter of 2024. Exports and investments drove growth, while contributions from consumption remained broadly stable. Vietnam continued to be the region’s best-performing economy, with a 7.55 percent growth. Thailand grew from strength to strength during the year, achieving 3.2 percent growth in the fourth quarter, representing the third consecutive quarter of economic growth acceleration. Indonesia saw a very slight growth uptick, while the Philippines kept a similar growth rate to the third quarter. Singapore’s growth moderated to 5 percent, still a credible expansion for a developed economy. Malaysia’s growth moderated to 5.0 percent from 5.3 percent in the previous quarter on the back of a slower energy and commodities sector performance.
GDP
FDIs kept positive momentum
Rate cuts in most economies
The region’s currencies fell
Inflation broadly eased
Labor markets stayed resilient
Output was mixed
Trade broadly robust
Economies held up
Private consumption strengthened
Private consumption strengthened in the fourth quarter across most Southeast Asian economies. A mix of strong labor markets, easing prices, and, in some countries, the prevalence of policy support measures helped boost consumption. The Philippines and Singapore were the only two economies that experienced a moderation in consumption growth in the fourth quarter.
Private consumption