Asean-5 Outlook 2024: Positioned for enhanced growth
ASEAN-5 is expected to see resilient economic growth, driven by electronic-led export expansion from Singapore, Malaysia, and Thailand as well as steady private consumption from Indonesia and the Philippines.
Most Asean-5 economies have successfully managed inflation within target ranges, and could potentially commence easing monetary policies that stimulate economic growth and boost equity performance.
The region’s economy will also receive strong support from a recovering tourism industry, fuelled by visa-free facilities and increased public spending on infrastructure upgrades and events organisation.
Strategically positioned as an alternative location for supply chain diversification, Asean-5 will continue to experience an increased influx of FDI.
Performance of Asean equities in 2023
Global equity markets concluded 2023 on a high note, with major market indices reporting double-digit gains. Cooling inflation, falling crude prices, and a heightened expectation of rate cuts by the US Federal Reserve and other central banks in 2024 collectively bolstered the vitality of the global stock market.
However, the MSCI AC Asean Index lagged, growing only 0.83 per cent in 2023. Among the Asean-5, Indonesia led with a robust annual return of 11.43 per cent, buoyed by strong foreign direct investment (FDI) inflows and a thriving IPO market. Singapore also extended a gain of 6.33 per cent, attributed to its strong economic fundamentals and stable macroeconomic outlook. Conversely, Thailand ended 2023 with a negative return of minus 11.45 per cent, due to its heavy reliance on China’s economy and a slowdown in its tourism industry recovery. Political uncertainty, a weak baht, and investor confidence issues further impacted Thailand’s equities. Malaysia and Philippines ended the year flat (all returns are presented in US dollar terms).
Despite Asean-5’s soft return in 2023, we believe there are still opportunities to be found within the region in 2024.
Robust growth driven by electronics-led exports
In 2024, Asean-5 economies are projected to grow at 4.3 per cent, outpacing the average global economic growth rate of 2.4 per cent, as well as that of major developed economies such as the US and the Eurozone.
Export-oriented economies such as Singapore, Malaysia and Thailand will benefit from electronics-led export growth. We anticipate a global semiconductor industry rebound, projecting a 40 per cent y-o-y growth in chip sales by 2Q25. This is driven by near-term inventory correction and sustained demand for AI-integrated electronics. In the Asean region, the demand for industrial electronics is also expected to surge due to Industry 4.0 transformation and 5G rollout initiatives.
Both Singapore and Malaysia are active players in the downstream semiconductor supply chain, specialising in outsourced semiconductor assembly and Test (OSAT) and Automated Test Equipment (ATE). With favourable government policies, infrastructure and strategic locations, both countries rank among the top ten electronic exporters globally. As such, Singapore and Malaysia are poised for high economic growth in 2024 on the back of the global semiconductor industry rebound.
Thailand, a major exporter of Printed Circuit Board (PCB) and Printed Circuit Board Assemblies (PCBA), will also stand to benefit from the semiconductor rebound. However, its export growth in 2024 will be subdued, primarily attributed to China’s weakened manufacturing demand and low consumption confidence. This is likely to offset the positive impact of the semiconductor rebound, given Thailand’s less prominent role in global electronic exports compared to Singapore and Malaysia, resulting in soft export growth.
Meanwhile, domestically driven economies such as Indonesia and Philippines will continue to experience steady consumption growth in 2024. In 2023, Indonesia’s economy surpassed government projections, achieving a 5.05 per cent y-o-y growth rate despite weakened exports due to lower commodity prices. Household consumption emerged as a key economic driver, and grew by 4.8 per cent year-on-year in 2023, fuelled by inflation returning to target levels since May 2023. With continued downward trending headline inflation, Indonesia’s household spending is expected to remain resilient in 2024. Anticipated institutional and regulatory reforms, such as the Job Creation Law, are likely to stimulate investment and boost public spending. High fiscal spending during the election period could also propel economic growth to five per cent y-o-y.
Meanwhile, the Philippines achieved a robust 5.6 per cent y-o-y economic growth in 2023, driven by a thriving labour market boosting private consumption. With a recordlow 3.1 per cent unemployment rate as of December 2023, the country’s favourable demographics, coupled with the 2023-2028 development program emphasising human capital investment and digital technology adoption, positions it for sustained economic buoyancy.