Southeast Asia’s Bright Economic Future

With a population of more than 600 million and with a total economic output that is approaching that of Britain or France, Southeast Asia is quickly becoming one of the world’s most important economic centers.  Moreover, economic growth rates across much of Southeast Asia are forecast to remain relatively high in the coming years as foreign investment increases in the region and as the region’s domestic markets grow substantially.  As a result, the region’s total economic output is forecast to be larger than that of all individual countries apart from the United States, China and Japan within the next decade, highlighting the potential of this vast region.

The main drivers of economic growth in Southeast Asia in the coming years will be the region’s larger (and poorer) countries, including Indonesia, the Philippines, Vietnam and Myanmar.  Each of these countries have economies that have grown on the average of around 6% per year in recent years, making them some of the most successful emerging markets in the world during this period.  Moreover, each of these four economies are forecast to record GDP growth rates in excess of 6% in the coming years.  This is due the fast-growing domestic markets in these countries as consumer spending rising in each of these markets.  In addition, foreign investment in each of these countries is growing thanks to the low-cost manufacturing opportunities offered by the low wages and expanding work forces in these emerging markets.

Southeast Asia’s more affluent economies are also forecast to post respectable growth rates in the years ahead.  Singapore, the region’s wealthiest country, has outperformed nearly all other developed economies in recent years as it remains the center of many of the region’s service sectors and high-tech manufacturing industries.  Meanwhile, Malaysia is forecast to record average GDP growth rates of 5% over the next five years as it closes in on its goal of becoming a developed economy by the end of this decade.  Finally, Thailand has struggled with political unrest in recent years, but a stabilization of that country’s political system would allow for Thailand to regain its position as one of the region’s most promising economies.

Given its strategic position between the world’s two giant emerging markets, China and India, it is no surprise that these two countries will have a major impact on the Southeast Asian economy in the coming years.  On the positive side, these two countries with a combined population of 2.5 billion offer vast potential markets for Southeast Asian exporters.  Moreover, as China becomes too expensive for many low-cost manufacturing operations, poorer Southeast Asian economies stand to gain much in terms of new foreign investment opportunities.  Nevertheless, China and India will also remain major competitors for Southeast Asia’s leading economies.  On one hand, both will be major competitors for foreign investment in the coming years.  Moreover, rising political tensions, particularly with China, could damage economic ties between Southeast Asia and China.  Nevertheless, the long-term economic future for Southeast Asia is bright and the opportunities for growth in the region are substantial and this is why foreign investors are flocking to this region.