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Economic Challenges for ASEAN in 2024

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The Asian Development Bank (ADB) has forecasted the economic growth for Southeast Asia in its ASIAN DEVELOPMENT OUTLOOK report of December 2023. The report has downwardly revised the growth forecast down from the earlier estimates in September. The growth forecast for 2023 has been revised from 4.6% to 4.3%, and for 2024, from 4.8% to 4.7%.

This downward revision in growth forecasts is attributed to the economic conditions in Southeast Asian countries. For instance, Malaysia’s growth forecast for 2023 has been revised from 4.5% to 4.2%, and for 2024, from 4.9% to 4.6%, reflecting a subdued economy due to weak external demand. Significant exports such as electrical products, petroleum, and palm oil have decreased, despite a positive trend in domestic demand, employment, tourism, and investment within Malaysia in the Q3.

Similarly, Thailand’s growth forecast for 2023 has been adjusted from 3.5% to 2.5%, and for 2024, from 3.7% to 3.3%. This is due to a contraction in exports, reduced government spending, and a slowdown in public and private investments. Additionally, a decline in the business sentiment index over concerns of rising production costs has been noted. Private consumption and tourism remain key drivers of the Thai economy.

However, the growth forecasts for Indonesia have not been reduced from the previous forecast; they continue to stand at 5% for both years. This stability is attributed to strong domestic demand, low inflation rates, and increased government investment in infrastructure, despite reduced exports due to declining external demand.

Singapore’s economic forecast remains unchanged, continuing its steady growth at 1% in 2023 and 2.5% in 2024. The services and construction sectors continue to exhibit strong growth.

The report also includes a regional inflation outlook for Southeast Asia, with the inflation rate for 2024 forecast to increase from 3.3% to 3.5%. This is due to risks of supply chain disruptions in the food sector caused by climate change and the El Niño phenomenon.

The report highlights significant challenges for governments in ASEAN countries in managing reduced growth forecasts and increased inflation rates. These challenges include geopolitical tensions, issues in China’s real estate sector, and stricter monetary policies in the United States and Europe.

ASEAN countries should adapt by strengthening their domestic economies, enhancing business sector competitiveness, developing infrastructure, improving regulations, and creating an investment-friendly environment to foster new economic opportunities in 2024.

Author:
Natjaree Petruang
Researcher
International Institute for Trade and Development (Public Organization)
www.itd.or.th
Publication: Bangkok BIZ Newspaper
Section: First Section/World Beat
Volume: 37 Issue:12546
Date: Wednesday, January 3, 2024
Page: 8 (bottom-left)
Column: “Asean Insight”

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