Southeast Asia as a Driver of Global Economic Growth
While many of the world’s leading emerging markets have struggled to record significant economic growth in recent years, one important region, Southeast Asia, has defied that trend. In recent years, Southeast Asia has recorded strong economic growth rates that have allowed the region to become an important driver of global economic, trade and investment growth. Amid the slowdown in growth in China and many of the world’s most important emerging markets, and the continued sluggish growth in most of the world’s developed economies, this strong performance by Southeast Asia has proven to be welcome news. In fact, in the years ahead, Southeast Asia’s role as a key driver of global economic growth will be enhanced.
In recent years, many of the world’s leading economies have struggled to generate high growth rates and the global economy as a whole has been stuck at near three percent growth for the past four years. In contrast, Southeast Asia has continued to record high rates of economic growth in recent years. Since the global financial crisis erupted in 2008, Southeast Asia’s economic growth rates have easily exceeded those of the global economy and trail only those of China and India among the world’s larger emerging markets. Even with the recent headwinds created by the downturn in China and the volatility of the region’s exchange rates, Southeast Asia has managed to record growth rates of nearly 5% per year. This growth has been driven by the region’s larger emerging markets such as Indonesia, Vietnam and the Philippines as they have benefitted from their increased political stability and their improving economic competitiveness vis-à-vis China and other leading emerging markets. In fact, were it not for the political unrest in Thailand, the region’s economy would have grown at an even faster pace in recent years.
Looking ahead, the outlook for the Southeast Asian economy remains bright and growth in the region should continue to exceed that of most other emerging markets and will continue to close the region’s growth gap with China. This growth will be driven first and foremost by rising demand levels in Southeast Asia’s domestic market. With rising wealth levels and a population of 660 million, Southeast Asia’s domestic market potential is vast and will play a more important role in attracting foreign investment to the region in the coming years. In addition, countries such as Indonesia, Vietnam and the Philippines will continue to attract investment in their export-oriented manufacturing and service sectors as these countries’ export competitiveness levels continue to rise. As a result, we expect economic growth rates in Southeast Asia to trend upwards in the years ahead to exceed 5% per year for the foreseeable future, allowing Southeast Asia to remain one of the fastest growing regions in the world.
As Southeast Asia continues to record some of the highest economic growth rates in the world, its role as a key driver of growth for the global economy will continue to increase. For example, with a huge market of increasingly wealthy consumers, Southeast Asia will emerge as a key market for exporters around the world. Moreover, the improving level of political stability across Southeast Asia in recent years has helped to propel the recent increases in foreign investment in the region and this trend is forecast to continue in the coming years, enabling to region to remain attractive to foreign investors. Finally, significant growth will be generated by Southeast Asia’s three most-populous countries (Indonesia, Vietnam and the Philippines) as each of these countries emerge as key centers of low-cost export-oriented manufacturing. As a result, there is little doubt that Southeast Asia will be one of the key drivers of economic growth for the global economy as the 21st century progresses.