Investing.com-- ASEAN economies are entering 2025 with a strong starting position for growth, BofA analysts said in a note, citing resilient domestic activity, improving labor markets, rising exports and recovering tourism.
But the brokerage noted that risks from U.S.-linked trade disruptions remained a major point of uncertainty, as President-elect Donald Trump prepares to impose more trade tariffs. This is expected to impact export-reliant economies in the region.
Still, BofA expects average gross domestic product growth to remain largely stable in 2025, at around 4.9% year-on-year, the same as 2024.
The Association of Southeast Asian Nations consists of 10 member states, including Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam- which make up a 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 biggest economy in the bloc- is expected to see GDP growth of 5.3% by mid-2025, up from 5.0% last year, while Singapore is expected to lag its regional peers, at 2.6%, compared to 3.8% in 2024.
Growth across the region is expected to be underpinned by a healthy labor market, BofA analysts said, while a recovery in tourism is also expected to help.
Steadily falling inflation presents a brighter outlook for ASEAN economies, as price pressures across the region retreated amid higher interest rates in 2024.
On the other hand, a shallower monetary easing cycle in the region may stymie growth. Regional central banks are expected to be more reluctant towards cutting rates due to a slowdown in the Federal Reserve’s plans to trim rates.
US trade jitters present biggest growth risks
BofA analysts said the biggest source of uncertainty for ASEAN came from the prospect of increased U.S. trade tariffs, as well as a brewing trade war between the U.S. and China.
The region is heavily exposed to trade with both countries, keeping risks of a spillover high.
Universal trade tariffs in the U.S. are likely to most impact the region, as is increased pressure on China’s economy.
Vietnam and Malaysia are the most exposed to trade headwinds, while Thailand and Singapore will see a moderate impact, BofA said.
Indonesia and the Philippines will see a relatively less severe impact, due to their domestically-oriented economies.