Investing.com– ASEAN economies enter 2025 with a strong starting position for growth, BofA analysts said in a note, citing resilient domestic activity, improving labor markets , the increase in exports and the recovery of tourism.
But the brokerage noted that risks from U.S.-related trade disruptions remained a major point of uncertainty, as President-elect Donald Trump prepares to impose more tariffs. This is expected to impact the region’s export-dependent economies.
Nonetheless, BofA expects average gross domestic product growth to remain largely stable in 2025, at around 4.9% year-on-year, 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 .
Among these, BofA expects the Vietnamese economy to grow the strongest in the first half of 2025, with GDP at 6.8%, compared to an increase of 7% in 2024.
Indonesia, the bloc’s largest economy, is expected to see GDP growth of 5.3% by mid-2025, up from 5.0% last year, while Singapore is expected to lag behind by compared to its regional peers, at 2.6%, compared to 3.8% in 2024. .
Growth in the region should be supported by a healthy labor market, BofA analysts said, while a recovery in tourism should also help.
Steadily falling inflation provides a better outlook for ASEAN economies, as price pressures in the region have eased amid higher interest rates in 2024.
On the other hand, a shallower cycle of monetary easing in the region could dampen growth. Regional central banks are expected to be more reluctant to cut rates due to the slowdown in the Federal Reserve’s rate cut plans.
U.S. trade nervousness poses biggest risks to growth
BofA analysts said the biggest source of uncertainty for ASEAN came from the prospect of higher U.S. tariffs, as well as a simmering trade war between the United States and China.
The region is highly exposed to trade with both countries, which keeps the risks of repercussions high.
Universal tariffs imposed by the United States will likely have a major impact on the region, as will increased pressure on the Chinese economy.
Vietnam and Malaysia are most exposed to trade difficulties, while Thailand and Singapore will see a moderate impact, BofA said.
Indonesia and the Philippines will experience a relatively less severe impact, due to their domestically oriented economies.
