NEWS AND INSIGHTS
Karrin Insights
Tuesday, 29 July 2025
2025 ASEAN Temperature Check
Given an eventful 1H2025 across markets, we thought it was a good time for a temperature check on the region, relooking at the economic outlook and performance of the overall ASEAN economy. Needless to say, the region has not been spared from the recent aberrations of trade tensions, geopolitics and domestic politics uncertainties. Economists now expect a more modest 4.2% - 4.3% growth for the region in 2025, lower than the 4.6% achieved in 2024. While these numbers are still an overall positive especially when juxtaposed against the expected global growth <3% in 2025, the vulnerability of consumption patterns to external shocks whether from trade or inflation, needs addressing.
ASEAN leaders are cognisant of this and are united in its goal of growing the region as evidenced by higher G2G involvement, encouraging peace and economic integration whilst ensuring collective advancement in digital transformation and cyber security. In this aspect, intra-ASEAN trades along with ASEAN-CHINA FTAs have never been more important in ensuring the continued growth of the region.
Looking at the economic outlook overall would appear that the two countries which continue to delivery strong growth (despite some moderation) are Vietnam and the Philippines, where 1Q25 growth of 6.9% and 5.4% were slower on a QoQ basis but still above the region’s average. Malaysia (4.4%), Indonesia (4.9%), and Thailand (3.1%) are facing further challenges and must navigate headwinds carefully.
Looking specifically at the various countries and what to expect for the full year, based on the Asian Development Outlook database:
ASEAN leaders are cognisant of this and are united in its goal of growing the region as evidenced by higher G2G involvement, encouraging peace and economic integration whilst ensuring collective advancement in digital transformation and cyber security. In this aspect, intra-ASEAN trades along with ASEAN-CHINA FTAs have never been more important in ensuring the continued growth of the region.
Looking at the economic outlook overall would appear that the two countries which continue to delivery strong growth (despite some moderation) are Vietnam and the Philippines, where 1Q25 growth of 6.9% and 5.4% were slower on a QoQ basis but still above the region’s average. Malaysia (4.4%), Indonesia (4.9%), and Thailand (3.1%) are facing further challenges and must navigate headwinds carefully.
Looking specifically at the various countries and what to expect for the full year, based on the Asian Development Outlook database:
- Vietnam: Among the fastest growing—estimated 6.3% in 2025, supporting exports and domestic demand. Big relief given the lower than expected US tariff rates.
- Philippines: Growth softened to about 5.6% (down from 6.0%), still among the top performers. Household consumption, government spending, and investments are all experiencing year-on-year growth.
- Indonesia: Growth at 5% in 2025 with ongoing structural reforms and AI/infrastructure initiatives. Politics continue to worry investors.
- Malaysia: Forecast trimmed to 4.3% from 4.9%, dampened by trade headwinds though supported by domestic demand, digitalisation, and investments.
- Thailand: Facing toughest slowdown—first quarter growth was ~3.1%, with full‑year forecast cut to between 1.8% from 2.8% Lack of tourists and new investments continue to wane with domestic and neighbouring politics not helping. High consumer and corporate debt.
- Singapore: Strong rebound in non‑oil exports (+13% year‑on‑year in June 2025) and Q2 growth of 4.3%, but future exposure to rising U.S. tariffs adds uncertainty to this trade dependent nation. Growth in 2025 expected at a modest 1.6%.
Key Drivers and Challenges
The shift of global supply chains out of China has boosted exports and investments in Vietnam, Malaysia and Indonesia and in particular, the electronics, textiles, tech and F&B space. This directly and indirectly continues to fuel the relatively strong consumption and infrastructure spending where rising domestic demand and large capital projects in countries such as Malaysia, Philippines and Indonesia are adding fuel to the growth fire. Also vital in the regional investment story has been the digital economy where ASEAN’s aspiration of becoming the world’s 4th-largest economy by 2030, is driven by the digital sector which is expected to grow towards USD1 tril by 2030. To this point, China continues to play a strong role as a partner through exporting its technological stack in areas such as digital payments and EV cars.
Risks and Headwinds
Escalating trade tensions with the US has resulted in prospects volatility as U.S. tariffs (up to ~49%) have dampened external demand and trade growth for several ASEAN countries. Global supply chain fragility is the other area where volatility in tech cycles and commodity prices has affected export‑reliant nations like Malaysia and Indonesia. Domestic inequality and labor challenges continue to fester where the shrinking middle class in Indonesia and structural unemployment risk continue to play out.
Also a key factor to consider is the importation of deflation from China given its strong competitiveness in delivering lower cost products (intermediate or finished) to South East Asia and its ensuing impact on its local domestic competition. These can be seen evidently from the car and food market where Chinese goods have blown other brands out of the water with its low cost alternative for consumers. As various policies are being pushed by governments to increase minimum wages, utilities and taxes, existing small and medium business are at risk of being squeezed, especially given the relative inability to pass on these new costs.
At cross roads
ASEAN is at an important juncture and while it remains economically relevant, it must balance opportunities that is available to it with the risk highlighted above that comes with it. While the consumption story will play out for decades to come, how bright this future looks will depend on managing trade relations wisely and investing in regional resilience. To this point, politics in many of these countries have frustratingly not helped. It must get better for it to be able to withstand the economic and geopolitical speed bumps which at this point appears to be persisting.
The shift of global supply chains out of China has boosted exports and investments in Vietnam, Malaysia and Indonesia and in particular, the electronics, textiles, tech and F&B space. This directly and indirectly continues to fuel the relatively strong consumption and infrastructure spending where rising domestic demand and large capital projects in countries such as Malaysia, Philippines and Indonesia are adding fuel to the growth fire. Also vital in the regional investment story has been the digital economy where ASEAN’s aspiration of becoming the world’s 4th-largest economy by 2030, is driven by the digital sector which is expected to grow towards USD1 tril by 2030. To this point, China continues to play a strong role as a partner through exporting its technological stack in areas such as digital payments and EV cars.
Risks and Headwinds
Escalating trade tensions with the US has resulted in prospects volatility as U.S. tariffs (up to ~49%) have dampened external demand and trade growth for several ASEAN countries. Global supply chain fragility is the other area where volatility in tech cycles and commodity prices has affected export‑reliant nations like Malaysia and Indonesia. Domestic inequality and labor challenges continue to fester where the shrinking middle class in Indonesia and structural unemployment risk continue to play out.
Also a key factor to consider is the importation of deflation from China given its strong competitiveness in delivering lower cost products (intermediate or finished) to South East Asia and its ensuing impact on its local domestic competition. These can be seen evidently from the car and food market where Chinese goods have blown other brands out of the water with its low cost alternative for consumers. As various policies are being pushed by governments to increase minimum wages, utilities and taxes, existing small and medium business are at risk of being squeezed, especially given the relative inability to pass on these new costs.
At cross roads
ASEAN is at an important juncture and while it remains economically relevant, it must balance opportunities that is available to it with the risk highlighted above that comes with it. While the consumption story will play out for decades to come, how bright this future looks will depend on managing trade relations wisely and investing in regional resilience. To this point, politics in many of these countries have frustratingly not helped. It must get better for it to be able to withstand the economic and geopolitical speed bumps which at this point appears to be persisting.
Author Certification:
All views presented above strictly reflect our personal views at the time of publishing. It should in no way be viewed as intending to dictate, advise in investment decisions or to solicit for business.
Important Disclaimers:
This document is produced and distributed by Karrin Associates Pte. Ltd. It has sole ownership over its materials and information provided in this document is strictly confidential. Any confidentiality breaches should assume any and all liabilities.
Information provided in this document is not audited and should not constitute investment advice or a recommendation. The recipient agrees that this document shall be used solely as references and not for any other purpose, commercial or otherwise. Any investment decision must be made solely on the basis of the recipient's own due diligence. Karrin Associates and its subsidiaries, affiliates, controlling persons, directors, officers or employees do not accept any liabilities whatsoever for any decision taken based upon the material.
All views presented above strictly reflect our personal views at the time of publishing. It should in no way be viewed as intending to dictate, advise in investment decisions or to solicit for business.
Important Disclaimers:
This document is produced and distributed by Karrin Associates Pte. Ltd. It has sole ownership over its materials and information provided in this document is strictly confidential. Any confidentiality breaches should assume any and all liabilities.
Information provided in this document is not audited and should not constitute investment advice or a recommendation. The recipient agrees that this document shall be used solely as references and not for any other purpose, commercial or otherwise. Any investment decision must be made solely on the basis of the recipient's own due diligence. Karrin Associates and its subsidiaries, affiliates, controlling persons, directors, officers or employees do not accept any liabilities whatsoever for any decision taken based upon the material.