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The ASEAN-6 ascent

The ASEAN-6 bloc (comprising of Indonesia, Malaysia, Philippines, Thailand, Vietnam, and Singapore) is one of the most dynamic and resilient in the world. The region has weathered many storms, including the Asian Financial Crisis (AFC) in the late-90s, SARS in early-2000s, Global Financial Crisis (GFC) in 2008-09, and the COVID-19 pandemic in 2020-21. The economies have come out stronger from the crises with strong domestic and external balance sheets, managing debt, fixing vulnerabilities, and supporting growth. Institutional quality has improved, with the average regional percentile ranking rising from sub-50 in early-2000s to 55.4 last year. Average life expectancy rose to 75.5 from around 72 over the same period, with the average PISA score close to the OECD average.

Other structural catalysts like urbanisation, growing integration with the global supply chains, export-oriented development strategies, and riding on China’s development wave were timely. Real growth averaged 5.2% in the past two and half decade to 2019 (to exclude the pandemic-related impact). The bloc’s heft is also reflected in the jump to the sixth largest economy in the world last year from 12th in 1990. Nominal GDP jumped four-fold in the two decades to 2024, from $959bn in 2005 to $3.8trn by 2024. On PPP-basis, Indonesia accounts for ~40% of the region’s output, followed by Thailand at ~15%.

Growth forecasts: 2025 to 2040

We forecast ASEAN-6’s economy to grow by 4.8% average (PPP-weighted) from 2025 to 2040. This will outpace China’s 3.0% average real GDP expansion, reversing the trend of the past three decades. The region offers significant opportunities and is on track to become the fourth-largest economy over the coming years, with its nominal economic size poised to rise from $3.8trn in 2024 to $5.6trn in 2030. Subsequently we expect this to almost double to ~$10trn in 2040. SEA-6’s population will climb to a sizeable 670mn in 2040, according to the United Nations (UN). Our regional forecasts reflect an aggregation of diverse economies with unique characteristics, and we provide key considerations in the individual country overview at the end of our report.

Key themes for the next decade and a half

Trade & Investment: Opportunities despite geoeconomic fragmentation

We believe that Southeast Asia will continue to position itself as a region open to international trade and investments, despite rising geoeconomic fragmentation and protectionism led by an inward US. Its open policies have attracted foreign investments and facilitated trade, serving the region well with fast economic growth following the massive shock from the AFC and more recently the COVID-19 pandemic. ASEAN-6’s high trade openness is reflected in its average goods and services trade-to-GDP ratio of nearly 120% across the six key economies, above key global economies and twice the world’s figure. The bloc achieved brisk goods trade growth of 6.6% CAGR between 2000 and 2024, above global trade expansion of 5.7%, and improved its global exports share over the past decade.

Building resilient foundations

Green transition amid economic growth pursuit

ASEAN-6 stands at a critical juncture, facing the dual imperative of sustaining robust economic growth and the urgent need to embrace the green transition. SEA is highly vulnerable to physical risks from climate change, with its coastlines and densely populated low-lying areas increasingly threatened by rising seas levels and climate-related hazards. The region is vulnerable and less ready to adapt to climate change to varying degrees. Indonesia, Philippines, and Vietnam ranked lower than the global average on both metrics, according to the ND-GAIN index. Singapore, Malaysia, and Thailand are better placed. The region could face losses ranging between 18% to 30% of GDP by 2070 under a high emissions scenario estimated by the Asian Development Bank (ADB).

Digital economy: counting on productivity gains

The region’s digital economy has had a positive spillover not only on the countries but has also helped to fulfil the AEC’s objectives, including plans to improve connectivity, productivity and competitiveness. Two key drivers in the region are favourable demographics and urbanisation. Nearly two-thirds of the population is under 35 years of age, which is more likely to embrace digital technology, out of a cumulative population of over 610mn as of 2024. This is accompanied by supportive growth dynamics, including urbanisation and a rising middle class, which has increased the demand for digital services. For a sustained pickup in the digital economy, not only internet penetration but also internet consumption is important.

Sectoral implications

From a sectoral perspective, investments – domestic and FDI – are likely to be attracted by the region’s structural strengths, shifting from domestic demand-oriented industries to higher value added as well as specialised labour-intensive sectors over the next 15 years. This is likely to translate into a transition from textiles, footwear, and furniture-driven push towards low to medium-tech industries, such as consumer-facing services, consumer electronics, e-commerce, and cleantech industries. Urbanisation and infrastructure development will continue to attract FDI in real estate, construction, transportation, and logistics. The expansion of the digital and green economies is also expected to draw significant investment into advanced technologies, including semiconductors, AI, electric vehicles, and renewable energy. We discussed these sectoral opportunities in detail in Navigating High Winds: Southeast Asia Outlook 2024 – 34.


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Chua Han Teng, CFA

Economist - Asean

[email protected]

Radhika Rao

Senior Economist – Eurozone, India, Indonesia

[email protected]

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