ASEAN Economies Outlook for 2025

According to Bank of America (BofA) analysts, ASEAN economies are entering 2025 in a strong position for growth, driven by robust domestic activities, improving labor markets, increased exports, and a recovering tourism sector.

Nevertheless, analysts caution that risks from U.S.-linked trade disruptions continue to create significant uncertainty, particularly as President-elect Donald Trump is expected to impose additional trade tariffs, which could adversely affect export-reliant economies in the region.

Despite these risks, BofA forecasts that the average gross domestic product (GDP) growth for ASEAN will remain stable in 2025, projected at approximately 4.9% year-on-year, a figure consistent with the growth rate in 2024.

The Association of Southeast Asian Nations (ASEAN) consists of 10 member states: Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam, which collectively represent a substantial portion of the bloc’s economic power.

BofA anticipates that Vietnam will exhibit the highest economic growth in the first half of 2025, with GDP expected to reach 6.8%, slightly down from 7% in 2024. Indonesia, ASEAN’s largest economy, is projected to experience a GDP growth of 5.3% by mid-2025, an increase from 5.0% the previous year. Conversely, Singapore is expected to lag with a 2.6% growth, compared to 3.8% in 2024.

Growth in the region is expected to be supported by a strong labor market and a recovery in tourism, according to BofA analysts. Declining inflation provides a more optimistic outlook for ASEAN economies, as price pressures have eased amid rising interest rates in 2024.

However, BofA warns that a less aggressive monetary easing cycle in the region could hinder growth. Regional central banks are predicted to be hesitant in cutting rates, especially given a deceleration in the Federal Reserve’s plans to lower its rates.

U.S. Trade Jitters and Growth Risks

BofA analysts identified increased U.S. trade tariffs and the potential for an escalating trade war between the U.S. and China as the primary sources of uncertainty for ASEAN. The region is particularly vulnerable to trade interactions with both nations, leading to a heightened risk of spillover effects.

Universal trade tariffs from the U.S. are likely to have the most significant impact on ASEAN, especially with the mounting pressure on China’s economy. Vietnam and Malaysia are expected to be the most affected by trade headwinds, while Thailand and Singapore will face moderate impacts. Indonesia and the Philippines are expected to experience less severe effects due to their more domestically-focused economies.