Financial markets

Macroeconomic outlook

FDI grew broadly in the region with the Philippines, particularly, seeing a spike of 127.2 percent from the same period a year before. Indonesia experienced the softest growth since the third quarter 2020 as investors took a wait-and-see approach ahead of the general elections in February 2024.

Capital flows

The fourth quarter 2023 saw all six central banks maintaining their policy rates. This is in contrast to the third quarter 2023 when central banks in Indonesia, the Philippines, and Vietnam raised policy rates. As growth momentum continues, demand conditions improve, and inflation eases, there is a strong push to cut interest rates, especially in Thailand where household debt levels have surged in the past few years.

Interest rates

Currency performance was mixed in the last quarter of 2023 and January 2024. The Indonesia rupiah, the Philippines peso, and the Vietnamese dong appreciated against the US dollar. Indonesia raised its rates in October 2023 to stem the depreciation of its currency, which went on to appreciate in November and December that year. The Malaysian ringgit, the Singapore dollar, and the Thai baht, however, declined against the US dollar. The ringgit specifically is close to its lowest level to the US dollar since the Asian financial crisis in January 1998.

Currency

Inflation abated across the region, thanks to the moderation in prices experienced in categories, such as food, transportation, and housing. Thailand saw the lowest inflation in nearly three years, while inflation in the Philippines was at a near two-year low.³

Prices

Labor markets across the region mostly improved, with Malaysia and the Philippines seeing record high labor participation and record low unemployment, respectively. Strong seasonal year-end demand—such as Têt in the case of Vietnam—and sectoral improvements, especially in tourism, contributed to stronger demand in the labor markets.

Labor

Industrial activities, including manufacturing, saw mixed performance across the region.² Singapore clocked credible performance this quarter with its industrial output growing by 3.2 percent to reverse the previous quarter’s contraction, while manufacturing output rose 9.0 percent. Indonesia’s PMI is at its highest in 28 months, while Vietnam achieved 6.2 percent industrial production growth and its PMI entered the expansionary zone for the first time since August 2023. Thailand’s manufacturing output declined for the fifth consecutive quarter as demand from major economies for its goods remained soft.

Industrial activity

Trade showed a mixed performance in the fourth quarter 2023 for most economies. Exports declined in Malaysia, the Philippines, and Singapore after lower demand for commodities and a slowdown in manufacturing-led exports growth hurt the major exporting economies in the subregion. Accelerated rate hikes in major global economies and export markets created a credit crunch that dragged down demand. On the other hand, exports from Indonesia, Thailand, and Vietnam performed well, led by continued growth in service exports—largely from the tourism sector.

Trade momentum

The region continued its growth path this quarter with Indonesia, Singapore, Thailand, and Vietnam recording stronger growth in the fourth quarter 2023 when compared to the previous quarter. Vietnam achieved consistently stronger growth each quarter in 2023 and, in the fourth quarter, was the best performing economy, growing at 6.7 percent following a strong contribution from its services sectors, including tourism.

GDP

Countries’ FDI flows grew

Policy rates mostly unchanged

Mixed currency performance

Inflation eased across economies

Labor markets mostly stronger

Mixed performances in output

economies grew

Strong service exports improved trade

Expansionary zone refers to PMI value above 50; “PMI data,” S&P Global, February 2024.

Asian development outlook, Asian Development Bank, September 2023.