Southeast Asia’s Economic Growth Forecast at 4.5%, Fueled by AI and Semiconductor Demand

A Promising Forecast

The Asian Development Bank’s (ADB) annual outlook predicts Southeast Asia’s economy will experience strong growth in 2024 and 2025, fueled by robust domestic demand, tourism recovery, and a growing semiconductor industry. The subregion’s GDP is projected to increase by 4.6% in 2024 and 4.7% in 2025.

Singapore’s GDP is expected to grow by 2.4% in 2024, supported by a recovering manufacturing sector and external trade. The Philippines and Vietnam are forecasted to have the highest growth rates in the subregion, reaching 6% in 2024 and 6.2% in 2025. Indonesia’s growth rate is projected to remain at 5% over the next two years.

Southeast Asia: GDP forecasts, Source: Asian Development Bank, Apr 2024

While the region’s economy slowed down in 2023 due to weaker external demand, the semiconductor industry is showing promise. Southeast Asian countries are poised to benefit from the increasing demand for semiconductors, driven by the rise of AI and other technologies. These countries are already attracting investments from major semiconductor manufacturers and are developing policies to further incentivize growth in this sector.

The semiconductor industry is crucial for various sectors, including AI, 5G, and electric vehicles. Southeast Asia’s focus on downstream services like assembly, testing, and packaging, along with its abundant workforce, makes it an attractive location for investment.

Malaysia and Vietnam: Emerging Hubs

Countries like Malaysia and Vietnam are making significant strides in becoming semiconductor hubs, with Malaysia targeting over US$107 billion in investments and Vietnam aiming to establish a semiconductor production hub by 2050.

The ADB recommends that governments in the region continue to implement policies that attract foreign direct investment, invest in research and development, and focus on human capital development to maximize the potential of the semiconductor industry.

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