Southeast Asia Sustains Economic Growth Momentum in Q1

The economies in Southeast Asia continued to sustain their growth momentum in the first quarter of 2024, with gross domestic product rising in all major economies, McKinsey & Company said in its Southeast Asia quarterly economic review

Southeast Asia’s growth momentum was driven by stronger domestic demand, supported by better demand conditions in some global export markets, McKinsey said.  

Growth in Indonesia, Malaysia, the Philippines, and Singapore accelerated during the first quarter of the year, while Thailand and Vietnam recorded slower growth, according to the consultancy.  

“Strong domestic demand, backed by tight employment markets and stable prices, along with strong performance particularly in tourism and a recovery in exports markets helped sustained growth in this quarter,” McKinsey’s analysts wrote. 

The first quarter of the year saw strong performance in tourism, which was one of the key drivers of growth across most markets in Southeast Asia. The Philippines saw the largest expansion in GDP growth, attaining 5.7 percent growth, with Vietnam and Indonesia following closely at 5.6 percent and 5.1 percent, respectively.  

Moreover, trade appears to be turning a corner “with promising outcomes seen across most markets,” McKinsey said. 

Gradual improvement in demand from major trading partners, such as China, Japan, and the United States, supported regional markets in Southeast Asia, with sectors including electronics seeing stronger demand. 

Vietnam’s exports, for example, jumped by 18.0 percent year-on-year, while the Philippines saw a rebound in exports to grow at 7.5 percent, having contracted in the previous quarter. 

Labor markets were supported by the strong recovery in the tourism sector. Indonesia saw its lowest unemployment rate since 1997, while Malaysia’s labor participation is at a record high.  

Foreign direct investment (FDI) broadly grew across the region, with Thailand seeing its FDI inflow double in the first quarter 2024, while the Philippines recorded a two-year high in February 2024 with US $1.4 billion, McKinsey noted.