Southeast Asia Economic Update 1Q 2025

Southeast Asia’s economy demonstrated both resilience and challenges in 1Q 2025, as ongoing global trade tensions weighed on outlooks. Vietnam led the region with a robust GDP growth of 6.9% year-on-year (y-o-y)¹, followed by the Philippines at 5.4%², and the region’s largest economy, Indonesia, at 4.9% , rounding out the three fastest-growing markets. Notably, the Philippines was the only country to register a higher growth compared to 4Q 2024

Sources: 2Q–4Q 2024 McKinsey & Company⁴, 1Q 2025 sources detailed below^1,2,3,5,6,7

Despite escalating global trade tensions and uncertainty surrounding the imposition of new reciprocal tariffs, the region continued to see growth in international trade during 1Q 2025. However, certain markets, such as Malaysia⁶ and Singapore⁷, were already seeing easing growth in goods and services export compared to the previous quarter (4Q 2024). Oxford Economics suggests that the best possible outcome for Southeast Asia would be a blanket 10% tariff on its U.S.-bound exports, which would allow the region to benefit from continued supply chain diversification away from China, which still faces a 145% tariff on its exports⁸.

The Asian Development Bank forecasts inflation in Southeast Asia to remain steady at 3.0% in 2025, reflecting low and stable price levels across several economies. The implementation of tighter monetary policy is expected to stabilise exchange rates and help mitigate inflationary pressures. Declining energy prices and ample food supply, particularly in countries like Indonesia and the Philippines, have also contributed to easing inflation in the region⁹.

Southeast Asia’s economy is projected to grow steadily at 4.7% in 2025 amid global trade tensions, driven primarily by resilient domestic demand, a rebound in tourism, and sustained public investment. Key regional drivers include rising household consumption, supported by easing inflation and improving labour markets, as well as accommodative fiscal and monetary policies in select countries. In Indonesia, growth is underpinned by government spending and policy support; in the Philippines, rising employment, remittances, and infrastructure projects boost consumption. Thailand benefits from a tourism recovery and transport investments, while Singapore, Malaysia, and Vietnam face moderating growth due to weaker global demand, though domestic activity remains a partial buffer⁹.

Overall, Southeast Asia's economic outlook remains positive. However, external uncertainties and internal challenges persist, necessitating prudent policy measures and strategic economic management to sustain momentum and mitigate potential risks.

Sources:

1. Vietnam GDP Growth Slowed in First Quarter Ahead of Trump’s Tariffs (Reuters)
2. Philippines Q1 GDP Grows 5.4% y/y (Reuters)
3. Indonesia Q1 GDP Growth Slowest in More Than Three Years (Reuters)
4. Southeast Asia Quarterly Economic Review: Steady Amid Uncertainty (McKinsey & Company)
5. Thai Economic Performance in Q1 of 2025 and the Outlook for 2025 (Thailand Office of National Economic and Social Development Council)
6. Malaysia Economic Digest (SME Bank, Malaysia Development Bank)
7. Ministry of Trade and Industry Singapore (Economic Survey of Singapore First Quarter 2025)
8. Southeast Asia Searches for A U.S. Trade Deal (Fortune)
9. Asian Development Bank Outlook (Asian Development Bank)

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