SUSTAINED growth in South-east Asia and South Asia will offset China’s economic slowdown and reduced growth in other subregions of developing Asia, said the Asian Development Bank (ADB) on Thursday (Apr 11).

South-east Asia is forecast to grow by 4.6 per cent in 2024 and 4.7 per cent in 2025, up from 4.1 per cent last year.

The subregion – which includes the 10 member nations of Asean and Timor-Leste – is expected to record rising growth on robust domestic demand and continued recovery in tourism, said the bank in its flagship Asian Development Outlook report.

South-east Asia’s growth is expected to make up for China’s economic slowdown, which is led by continued weakness in its property sector and the fading post-pandemic rebound in services.

Growth in the world’s second-largest economy is expected to moderate to 4.8 per cent in 2024 and 4.5 per cent in 2025, down from 5.2 per cent last year.

Star performers

Notably, within Asean, the Philippines and Vietnam are forecast to chart the highest growth, with both countries expected to expand by 6 per cent in 2024 and 6.2 per cent in 2025.

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This compares with last year’s 5.6 per cent for the Philippines and 5 per cent for Vietnam.

Growth in the Philippines, South-east Asia’s fastest-growing economy in 2023, has largely been driven by services, led by retail trade and tourism.

ADB expects domestic demand to increase and boost growth, as government consumption increases while investment and household consumption grow on moderating inflation and easing monetary policy.

Meanwhile, Vietnam’s economy is expected to be stimulated by restored growth in export-led manufacturing, services and stable agriculture.

Other factors include positive inflows of foreign direct investment and remittances, a sustained trade surplus, continued fiscal support and a substantial public investment programme.

Easing inflation

In the near term, ADB expects inflation in South-east Asia to ease and moderate towards central bank targets.

The bank expects the subregion’s inflation to moderate to 3.2 per cent in 2024 and further to 3 per cent in 2025. This compares with 5.3 per cent in 2022 and 4.1 per cent in 2023.

ADB principal economist John Beirne said in a press briefing on Wednesday: “The main reasons would be the lagged effects of tight monetary policy in the past eventually coming through.”

He added: “Many of the economies in the subregion have reached the peak with the interest rate hiking cycle, (with) many turning the corner, and this is a testament to the balance that needs to be struck between moderation of inflation and also supporting growth.”

He noted that labour market flexibility and easing in supply constraints also contributed to the moderation in inflation across South-east Asia.

Despite this, lower agriculture yield, elevated food prices and currency depreciation could still put upward pressure on inflation.

Unsurprisingly, inflation in Laos and Myanmar is expected to remain in double digits amid persistent currency depreciation.

The Lao kip lost half its value against the US dollar in 2022 and a further 16.3 per cent last year.

Meanwhile, political turmoil in Myanmar has resulted in decreased food production and supply, a contraction in agriculture and supply chain disruptions.

Looking beyond South-east Asia to developing Asia in a wider context, inflation is expected to ease to 3.2 per cent in 2024 and further to 3 per cent in 2025, down from 3.3 per cent in 2023.

Said ADB chief economist Albert Park: “Regional inflation will further cool down in all subregions aside from East Asia.”

He noted: “Tight monetary policy is still in place in most economies and will help combat inflation, supported by moderation in global inflation and stable fuel prices.”

ADB defines developing Asia as comprising 46 economies across the Caucasus and Central Asia, East Asia, South Asia, South-east Asia and the Pacific.