[SINGAPORE] South-east Asia emerged from the tariff-driven turbulence in the first half-year with decent prints, yet some of its largest markets have either downgraded their forecasts or are expected to miss official full-year growth targets.
As the world enters the home stretch of 2025 and an era that has been branded the slowest decade for global growth, The Business Times re-examines the standings of South-east Asia’s six largest markets, and takes a look at whether key indicators are supporting the nations’ growth stories.
Thailand: Sick man of South-east Asia?
Economists are cutting projections for Thailand’s growth, as the sacking of its fifth prime minister in under 20 years compounded the chaos from its conflict with Cambodia amid a recent string of weak data prints.
Though Thailand is no stranger to political turmoil, prolonged instability could deal a body blow to its economy, which has long struggled to keep pace with that of its regional counterparts.
The lowdown on Thailand’s 2025 tumult
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May 28: A decades-old border clash reached a fresh boiling point after the death of a Cambodian soldier along the disputed stretch
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Jun 15-18: The fighting prompted a call between then-Thai Prime Minister Paetongtarn Shinawatra and Cambodian elder statesman Hun Sen, who leaked the audio recording. The Bhumjaithai Party withdrew its support, leaving Paetongtarn’s coalition with a slim majority
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Jul 1: Thai Constitutional Court suspended Paetongtarn
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Jul 28: Both countries agreed on a ceasefire
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Aug 29: Thai Constitutional Court ousted Paetongtarn
Maybank cut its gross domestic product growth forecast for the second half of the year by 0.4 percentage point to 1.3 per cent, from 1.7 per cent.
For the full year, the house tweaked its projection to 2.1 per cent from an earlier 2.3 per cent. It expects Thailand’s economic growth to come in at 2 per cent in 2026.
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Maybank analysts Chua Hak Bin and Erica Tay said in an Aug 28 report: “A volley of downside risks have materialised, weighing on manufacturing, services and construction.”
They noted that, besides tourism, the closure of Thailand’s borders with Cambodia and Myanmar are affecting trade worth a combined 570 billion baht (S$22.7 billion), disrupting Thailand-plus-one supply chains and roiling foreign labour supply.
Likewise, IMA Asia slashed its forecast for 2026 to 1.4 per cent from an earlier 1.8 per cent on political uncertainty, but kept its projection for 2025 at 2.2 per cent, citing the export surge in the first half of the year.
Though OCBC maintained its forecast of 1.8 per cent for the year, senior Asean economist Lavanya Venkateswaran and Asean economist Jonathan Ng expect growth to slow sharply to 0.5 per cent in the second half, compared with 3 per cent in the first half.
They highlighted that the kingdom’s private consumption index charted in June its first negative reading since December 2023, and expect momentum in government spending to take a hit.
The kingdom on Sep 5 named business tycoon Anutin Charnvirakul of the Bhumjaithai Party as its new leader.
Said DBS senior economist Chua Han Teng in a Sep 2 update: “Even if a swift appointment of a prime minister and a refreshed Cabinet mitigates very near-term domestic political uncertainty, such concerns will probably linger as the coalition taking power is unlikely to have a strong parliamentary support.”
The Thai finance ministry in July bumped up its 2025 growth forecast to 2.2 per cent from 2.1 per cent on strong first-half prints.
Its national economic planning agency in August raised its range to between 1.8 and 2.3 per cent, up from 1.3 to 2.3 per cent. The council said its estimates do not account for the domestic political situation, reported Bloomberg.
Indonesia: Hanging by a thread
Economists are holding on to their growth projections for South-east Asia’s largest economy for now, noting that recent protests rocked the political boat but are unlikely to result in major shifts in government policy.
Maybank maintained its GDP growth forecast of 4.9 per cent for 2025 and 2026.
While prolonged social tensions could hurt tourism and delay investments as businesses adopt a wait-and-see approach, soaring public sentiment over the economy could pressure the government to prop up growth, said Maybank’s Chua and economist Brian Lee in a Sep 2 report.
And although export growth is expected to cool with higher tariffs and a front-loading payback, the pair believes the severity to be less than anticipated, given exemptions on palm oil and a continued tariff advantage over China and India.
That said, anti-government demonstrations continue to surge across the country even as its political parties yielded to protestors by reversing several state-funded perks.
DBS senior economist Radhika Rao cautioned in a Sep 1 report: “If the official response to appease the protesters is perceived as being insufficient, any subsequent flare-ups are likely to dampen consumption demand, tourism and investment.”
The house maintains its earlier forecast of softer sub-5 per cent growth in the second half of the year, with the full-year figure averaging 4.8 per cent, but warned that domestic challenges risk amplifying prevailing global uncertainties.
Rao added that a larger-scale reorientation in fiscal expenditure is unlikely, yet fresh revenue-generating measures – especially those focused on taxes – are also off the cards.
On a more positive note, Macquarie Capital’s head of Indonesia research, Ari Jahja, said the country could emerge stronger if structural reforms are executed.
The Philippines: Burdened by global slowdown
South-east Asia’s star performer continues to be supported by strong fundamentals, but economists expect a global slowdown in growth to cast a long shadow on the Philippine economy.
DBS’ Rao in an Aug 8 report noted that the house revised its full-year growth forecast to 5.6 per cent from an earlier 5.8 per cent, citing a similar downward revision by the country’s economic managers.
The Philippines’ Development Budget Coordination Committee in June said it projected growth at 5.5 to 6.5 per cent for the full year, down from 6 to 6.5 per cent.
The Asean+3 Macroeconomic Research Office in its latest quarterly report in late July also trimmed its forecast for the year to 5.6 per cent from 6.3 per cent, primarily due to the projected impact from slower global growth.
Its economists cautioned that a broader global slowdown will hit exports, business sentiment and investment activities – even if the direct impact of US tariffs on the Philippines is weaker than on its neighbours because of its more domestic-centric economic structure.
The archipelago’s export performance remains a bright spot, maintaining in July double-digit growth that led to Maybank bumping up its 2025 growth forecast for exports to 12.3 per cent from an earlier 9.9 per cent.
Its analysts noted: “Amid cautious sentiments, given the ongoing global tariff-related uncertainties, the manufacturing sector continues to drive export growth, supported by firmer growth in the electrical and electronics sector.”
Vietnam: Lotus in the mud
Growth star Vietnam is set to be South-east Asia’s best-performing economy for 2025 – even as it is expected to be among the worst-hit by US tariffs.
The republic notched its best first-half performance in more than a decade, with GDP growth of 7.5 per cent, but is broadly expected to miss the government’s target range of 8.3 to 8.5 per cent that was revised up in July.
Investment spending is the critical indicator to watch.
Maybank analysts Vu Viet Linh and Quan Trong Thanh said in an Aug 29 report: “We are getting more excited about the next growth cycle for Vietnam’s economy and stock market.” The pair sees Vietnam’s infrastructure-focused investment plan of US$1.4 trillion over five years as a pivotal step to tackling capital constraints and a growth catalyst for its private sector and stock market.
The house expects Vietnam’s economy to expand by 7.3 per cent this year, supported by US Federal Reserve rate cut bets that would allow the State Bank of Vietnam to sustain its expansionary monetary stance.
But economists are also watching the credit space, especially as first-half lending climbed at its highest rate since 2023 and amid Vietnam’s scrapping of its credit growth caps for next year.
IMA Asia cautioned that Vietnam’s surge in capital expenditure comes with a heavy price tag of risky acceleration in credit growth. “The pursuit of high growth risks a repeat of the 2010-2012 credit crash, which derailed the economy.”
Singapore: Rosy H1 raises hopes
Singapore in August upgraded its full-year growth forecast to a range of 1.5 to 2.5 per cent, up from 0 to 2 per cent, on the back of a robust Q2 performance.
The move followed an earlier spate of upgrades by economists, who cautioned that the nation’s second-half performance would likely pale in comparison, in line with global weakness in growth.
Malaysia: Steady as she goes
Economists broadly nudged their full-year estimates for Malaysia upwards even as first-half prints fell short of advance forecasts, citing firm domestic fundamentals.
IMA Asia lifted its full-year forecast to 4.3 per cent from an earlier 4.1 per cent, and continues to expect 2026 growth to come in at 3.8 per cent.
Maybank also bumped up its 2025 forecast to 4.2 per cent from 4.1 per cent, and expects the Malaysian economy to expand by 4.1 per cent next year.
Its analysts noted that the narrative on growth dynamics continues to be a story on domestic tailwinds against external headwinds. US tariffs continue to cloud Malaysia’s outlook, but its economy remains on the growth path, said the Aug 17 report.
“Consumer spending is supported by income growth… The investment upcycle is sustained by the ongoing realisation of robust approved private investment since 2021, domestic direct investment by government-linked companies, progress in major infrastructure projects and the impact of strategic initiatives like the Johor-Singapore Special Economic Zone.”
