Financial markets
Macroeconomic outlook
In the third quarter, Southeast Asian countries continued to build on the positive momentum from the previous quarter. Indonesia, the Philippines, Thailand, and Vietnam saw higher foreign direct investment (FDI) inflow this quarter. This reflects the region’s attractiveness as an investment destination as businesses continue to reassess and reconfigure their global operational and supply chain footprints. Southeast Asia attracted investments in sectors including automotive, electronics, mining, and services, with each country developing clear strength and value propositions in specific sectors over others.
Key indicator details can be found in Exhibit 2.
Capital flows
Bank Indonesia (BI) was the only central bank in the region to act in the third quarter, cutting its policy rate by 25 basis points to 6 percent in September 2024, the first time since the progressive hikes in February 2021. The central banks of the Philippines and Thailand cut rates a bit later, in October 2024. This marked the second rate cut in 2024 for the Philippines, while the revision was the first cut for Thailand in four years. Other central banks were comfortable with their prevailing positions. Growth, inflation, and stable monetary conditions will continue to be core considerations in determining the region’s central banks’ assessments of their policy rates in the future.
Interest rates
All Southeast Asian currencies rallied against the US dollar in the third quarter during the lead-up to the US Federal (Fed) rate cut in September 2024. The Malaysia rupiah strengthened the most out of all currencies, appreciating by 14.9 percent. The Thai baht appreciated by close to 12.0 percent against the US dollar, at one point reaching its highest level in 31 months against the greenback. All of the region’s currencies have retreated since October 2024 as the US dollar strengthened, following expectations of smaller Fed policy rate reductions in the future, given the robust economic performance in the United States.
Currency
Inflation broadly eased, continuing the trend seen over the recent quarters. Prices across the region appear to have stabilized, with all countries reporting inflationary levels already within their respective target rates or at levels deemed acceptable.
Prices
Labor markets across the region continued to remain strong, with unemployment in all markets improving. Indonesia experienced its lowest unemployment rate since 1997; similarly, Singapore saw unemployment at its joint lowest in the past five years. Malaysia’s unemployment situation normalized to prepandemic levels. In the longer term, however, workers across the region will need to upskill or reskill. This is critical to drive sustainable, inclusive growth in response to structural changes in evolving sectors and the challenge of navigating technological disruption. In the case of developing markets, such as Indonesia and the Philippines, workforce employability needs to be improved as their employment ecosystems remain dominated by people working in the informal sector.
Labor
Industrial activities appeared to be turning the corner, with strong local and foreign markets helping to prop demand in the third quarter. Singapore was a bright spark, rebounding to expand by 11.0 percent after seeing continued contractions in recent quarters. Malaysia recorded its strongest quarterly performance in 2024, with exports-oriented clusters driving growth, while Thailand attained its first back-to-back quarterly growth since 2022. Purchasing Managers’ Index (PMI) readings, meanwhile, were mixed as geopolitics remain uncertain and could still weigh down on future factory activities.
Industrial activity
Trade gathered pace, with export growth supported by demand from key trading partners such as China and the United States, particularly in commodities as well as electronics, which continued to benefit from the global technology upcycle. Export growth accelerated in the third quarter across Indonesia, Malaysia, Thailand, and Vietnam. Singapore returned to its prior growth trajectory following a spike in the second quarter, while the Philippines saw a 1.0 percent contraction. Imports broadly grew strongly, following an increase in local demand for intermediate and capital goods to support industrial production and investment activities.
Trade momentum
Despite mixed performance in the third quarter of 2024, GDP growth remained robust in the region, with strong exports and investments broadly driving growth. Vietnam’s GDP grew 7.4 percent in the third quarter, its third-highest growth in the past five years. Singapore saw its strongest GDP growth since 2022 at 5.4 percent, up from 2.9 percent in the previous quarter. Thailand, too, saw growth accelerate. Malaysia’s economy grew slower at 5.3 percent in the third quarter, yet it still had a credible performance, with exports, investments, and consumption remaining stable. This is also in light of the second quarter’s growth of 5.9 percent, being one of Malaysia’s best quarterly performances in the past three years. Indonesia experienced its second consecutive quarter of slower growth as consumption, a key growth driver, remained flat. The Philippines recorded 5.2 percent growth, the slowest over the past five quarters, as exports saw a blip.
GDP
FDIs’ momentum continued
Indonesia, later Thailand and the Philippines, lowered rates or central banks cut rates
The region’s currencies rallied
Inflation broadly eased
Labor markets remained strong
Output turning the corner
Trade gathered pace
Growth broadly robust