Investing.com- ASEAN economies enter 2025 with a strong starting position for growth, BofA analysts said in a note, citing resilient domestic activity, an improving labor market, rising exports and a recovery in tourism.
But the brokerage notes that risks of trade disruptions linked to the US remain a major uncertainty as President-elect Donald Trump prepares to impose more trade tariffs. This is expected to affect economies in the region that rely on exports.
Still, BofA expects average gross domestic product growth to remain largely stable in 2025, at around 4.9% annually, the same as in 2024.
The Association of Southeast Asian Nations consists of 10 member states, including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – which make up the bulk of the bloc’s economic power.
Of these, BofA expects Vietnam’s economy to grow the most in the first half of 2025, with GDP at 6.8%, compared to a 7% increase in 2024.
Indonesia, the bloc’s largest economy, is expected to post GDP growth of 5.3% by mid-2025, up from 5.0% last year, while Singapore is expected to lag behind its regional peers, at 2 .6%, compared to 3.8% in 2024.
Growth across the region is expected to be supported by a healthy labor market, BofA analysts said, while a recovery in tourism is also expected to help.
Steadily falling inflation presents a better outlook for ASEAN economies, as price pressures across the region have eased due to higher interest rates in 2024.
On the other hand, a shallower cycle of monetary easing in the region could hamper growth. Regional central banks are expected to be more reluctant to cut rates as the Federal Reserve’s rate-cutting plans slow.
The trade conflict in the US represents the biggest risk to growth
BofA analysts say the biggest source of uncertainty for ASEAN comes from the possibility of increased US trade tariffs, as well as a looming trade war between the US and China.
The region is heavily exposed to trade with both countries, so the risk of spillover is high.
Universal trade tariffs in the US are likely to affect the region the most, as well as increased pressure on the Chinese economy.
Vietnam and Malaysia are most exposed to trade winds, while Thailand and Singapore will experience a moderate impact, BofA said.
Indonesia and the Philippines will experience relatively less impact due to their domestically oriented economies.
