Southeast Asia economies continued to deliver credible economic performance, although growth momentum was mixed across the region. Vietnam’s GDP growth of 7.4 percent in the third quarter was its third-highest attained in the past five years, while Singapore saw its strongest quarterly GDP growth since 2022 at 5.4 percent. Thailand, too, saw accelerated growth. Growth momentum, meanwhile, abated in Indonesia, Malaysia, and the Philippines (Exhibit 1). Core growth drivers remained broadly solid, with the combination of strong exports, higher investments, output expansion, and stable consumption prevalent across most markets.1
The resilient labor markets and lower inflation conditions, coupled with sustained demand from key global markets, such as China and the United States, should provide hope for a continuation of a positive economic trajectory in the region. The growth outlook will, however, remain subject to domestic and external risk considerations, especially the ongoing global geopolitical challenges.
Regional economic overview
In this article, we focus on the economies of six countries in Southeast Asia: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. We start by setting the scene with a regional overview.
In the following section, we focus on the six specific countries in Southeast Asia, examining their macroeconomic conditions and financial markets.
Indonesia
Indonesia’s economic momentum softened in the third quarter, with GDP expanding 4.95 percent year on year from 5.05 percent in the previous quarter. This was the slowest GDP growth since the third quarter of 2023, as household consumption continued to remain flat. Exports and imports grew strongly, while investment activity saw a surge, driven by infrastructure projects and capital investment (Exhibit 3). Public consumption rebounded ahead of the looming regional elections. Inflation continued to ease, consistently staying within the central bank’s target range.
Macroeconomic outlook
GDP: Indonesia recorded 4.95 percent in GDP growth in the third quarter, slower than the previous quarter’s growth of 5.05 percent. This marks the second consecutive quarter of slower growth as weak consumption continued to be a drag. Investment, however, recorded its fastest growth in a year, supported by investments in the new capital city in Nusantara, East Kalimantan, and broader infrastructure spending.2 Government consumption and exports, too, saw improved performance. From a sector viewpoint, construction was the top-performing sector, growing at 7.48 percent, while the manufacturing sector, a key growth engine, increased 4.72 percent this quarter.3
Private consumption: Household consumption growth continued to remain stagnant, growing at 4.91 percent in the third quarter, slightly below the 4.93 percent year-on-year growth recorded in the previous quarter. Inflation stayed under control, but household purchases for daily needs remained flat, with some expenditure segments, such as clothing and housing, seeing a slowdown.4
Trade: Trade gathered pace as exports and imports grew 9.1 and 11.5 percent, respectively, well ahead of the previous quarter’s 8.2 and 7.8 percent growth, respectively. In the latest release by BPS-Statistics Indonesia, export growth momentum continued in October, with non-oil and gas exports rising by 11.04 percent year on year, driven by strong demand for the country’s commodities.5 Imports also surged by 17.49 percent year on year, reflecting increased demand for intermediate and capital goods, such as machinery and equipment, supporting industrial and investment activities. China remained Indonesia’s top trading partner.6
Industrial activity: On the back of strong local and foreign demand, the manufacturing sector grew by 4.72 percent in the third quarter, compared to 3.95 percent in the prior quarter.7 Food and beverage manufacturing was a case in point, expanding by 5.82 percent as manufacturers stepped up production to meet demand from local and international buyers.8 PMI, however, stayed within the contractionary zone throughout the third quarter, with the latest October figure clocking in at 49.2, similar to September. Subdued market conditions from continued geopolitical uncertainty were one of the drivers of the weakness in factory activities.9
Labor: Indonesia’s National Labour Force Survey’s latest release indicated an improvement in the unemployment rate, which declined to 4.91 percent in August 2024 from 5.32 percent in the same month of 2023.10 This marked the lowest level of unemployment seen since 1997, although structural challenges of the employed workforce being dominated by workers in informal sectors still remain.11
Inflation: Inflation continued its declining trend over the third quarter, with the October figure of 1.71 percent marking the sixth consecutive month of decline since March 2024. Inflation throughout 2024 has come within the central bank’s target range of 1.5 to 3.5 percent, particularly October’s numbers, which were the lowest seen since October 2021. Food prices in October rose at the slowest pace in 15 months—increasing by 2.35 percent compared to 2.57 percent in September—as rice supplies remained ample due to the delayed harvest season shifting from March to May. Inflation also eased slightly in other segments, such as recreation, culture, and education, while transportation saw a deflation of 0.08 percent.12
Financial markets
Currency: The Indonesia rupiah strengthened over the course of the third quarter by about 8 percent against the US dollar, mirroring the trend seen in most parts of the region. However, it lost half of the gains in the third quarter and has been weakening since October, although it was still at a level above the lows seen in June 2024. The recent weakness has been attributed to the broader strengthening of the US dollar and the capital flight to US dollar assets since the conclusion of the recent US elections. Stabilizing the rupiah will likely be a key priority for the central bank, especially in the near term.13
Policy rate: Bank Indonesia (BI) cut its policy rate by 25 basis points in September 2024 to 6 percent for the first time after the progressive hikes seen since February 2021. Those hikes aimed to bolster economic growth, believing the rupiah could remain stable and inflation stay low in 2024 and 2025. The outcome of the recent US elections could, however, alter future global economics and geopolitics. BI has maintained its rate since September 2024 in its October and November 2024 meetings and is likely to keep rates consistent in the near term as it looks to ensure the stability of the rupiah.14
Capital flows: FDI inflows recorded the fastest growth since the first quarter of 2023, surging by 18.55 percent year-on-year to $14.94 billion (232.65 trillion rupiah) in the third quarter of 2024, following a 16.6 percent rise in the second quarter. Clarity on Indonesia’s economic priorities post-elections earlier in 2024 helped build investors’ confidence, with priority sectors linked to the electric vehicle (EV) supply chain, such as mining and metal refining industries, seeing strong investment support. The base metal industry received the largest share of FDI at $3.03 billion, followed by transportation, warehousing, telecommunications ($2.02 billion), and mining ($1.56 billion).15
Malaysia
Malaysia’s economy continued to gather pace, albeit at a slower rate of 5.3 percent in the third quarter, in contrast to the second quarter’s growth of 5.9 percent, which was one of the country’s best quarters in the past three years. Strong exports, expansion in investments, and resilient household consumption helped propel growth, while sector performances were mixed (Exhibit 4). The labor market was robust, with labor participation at a historic high. The ringgit was the region’s strongest currency in the region, and inflation remained stable.
Going forward, Malaysia expects to sustain its growth momentum, with investment activities and household spending remaining robust and exports continuing to improve.16
Macroeconomic outlook
GDP: Malaysia’s economy remained strong, although growth moderated to 5.3 percent in the third quarter from 5.9 percent in the previous quarter. Higher goods and services exports, especially in tourism, stronger expansion in private and public investment activities, and continued stability in household spending were key demand drivers.
The supply side experienced contrasting fortunes. Manufacturing saw stronger growth of 5.6 percent (4.7 percent in the previous quarter), driven by export-oriented clusters such as electricals and electronics. Construction, too, expanded. Meanwhile, the services sector growth decelerated to 5.2 percent (5.9 percent in the previous quarter), although consumer subsectors remained strong.17
Private consumption: Private consumption saw slower growth of 4.8 percent in the third quarter from 6.0 percent the previous quarter, though slightly stronger growth than the first quarter’s 4.7 percent. Strong labor market conditions and policy support to curb a rise in the cost of living will continue to remain important for Malaysia to sustain consumption levels.18
Trade: The exports sector continued its upward trajectory, achieving 7.8 percent growth in the third quarter, stronger than the 5.8 percent recorded in the previous quarter and over double the first quarter’s 2.0 percent growth. Continued strong performance in the electrical and electronics (E&E) sector and an expansion in commodity exports drove growth, attributed to higher external demand and the positive effects of the global technology upcycle. Meanwhile, imports built on the second quarter’s growth (15.0 percent) to achieve 20.8 percent import growth in the third quarter, driven by strong domestic demand for capital and intermediate goods to support investment activities and the production of manufactured exports.19
Industrial activity: Manufacturing output grew 5.6 percent in the third quarter, the strongest quarterly performance recorded this year. Exports-oriented clusters supported production growth this quarter, including E&E and petrochemicals.20 PMI stood at 49.5 in October, similar to September’s figure. This marks the fifth consecutive month of contraction in factory activity. While October saw a rise in new order intakes, production volumes experienced a reduction, leading to lower purchasing activities.21
Labor: Malaysia’s unemployment rate declined further to 3.2 percent in the third quarter from 3.3 percent in the prior quarter. The improvement ensured that unemployment continued to be anchored at pre-COVID-19 levels and remained low. Labor demand strengthened, with overall employment increasing by another 100,000 this quarter to 16.7 million. The labor participation rate continued to remain at a historic high of 70.5 percent.22
Inflation: Inflation remained constant at 1.9 percent in the third quarter. Food and beverages saw a moderation in prices, but higher inflation was recorded for diesel. Monthly inflation has thus far been stable in 2024, hovering between 1.5 to 2.0 percent. The forward-looking view for inflation will continue to depend on policy measures on subsidies and price controls, along with global commodity prices and financial market developments.23
Financial markets
Currency: The ringgit was the region’s best-performing currency in the third quarter, appreciating by 14.9 percent against the US dollar. From October to mid-November, however, the ringgit depreciated by 7.8 percent as the dollar strengthened, following expectations of smaller Fed policy rate reductions, given the robust economic performance in the United States.24
Policy rate: In its latest policy meeting in November 2024, the central bank opted to maintain the policy rate at 3.0 percent, reiterating that the present monetary stance would continue to support the economy and was in line with the bank’s latest assessment of inflation and growth prospects. While downside risks continue, Malaysia expects its economic performance to be sustained and driven by resilient domestic expenditure and stronger exports. Inflation, meanwhile, has thus far been modest and is expected to remain manageable.25
Capital flows: Malaysia’s FDI inflows stood at 14.5 billion ringgit ($3.24 billion) in the third quarter, from 9.1 billion ringgit in the preceding quarter.26 The services sector continued to be the largest beneficiary of FDI in Malaysia, predominantly in the information and communication and wholesale and retail trade subsectors, with Hong Kong, Singapore, and Switzerland being the country’s top investors.27
The Philippines
The Philippines’ economy saw a blip in the third quarter, with growth slowing to 5.2 percent from 6.3 percent the previous quarter. This marks the country’s slowest growth in the past five quarters and brought the country’s year-to-date growth to 5.8 percent, below the government’s full-year target of 6.0 to 7.0 percent. There are, however, expectations for growth to regain momentum in the last quarter of 2024 on the back of easing inflation and accommodative monetary policy.
Exports were a drag in the third quarter, while consumption was stronger (Exhibit 5). The quarter also saw the central bank implementing its second rate cut for the year, with further cuts not being ruled out.
Macroeconomic outlook
GDP: The Philippines’ economy recorded a slower growth of 5.2 percent in the third quarter for a year, bucking the trend of improving growth seen in the past three quarters. Both the industry and services sectors saw growth moderate to 5.0 and 6.3 percent, respectively. The agriculture sector experienced a contraction of 2.8 percent due to severe weather and typhoons, which limited agricultural production and fishing activities. Government expenditure slowed considerably to 5.0 percent, from 11.9 percent in the second quarter. Weaker exports performance rounded up the slower growth narrative in the third quarter. The latest outcome brought the Philippines’ year-to-date GDP expansion to 5.8 percent, lower than the government’s target of 6.0 to 7.0 percent for 2024. Despite this, the government remains optimistic about achieving its 2024 target as it expects easing inflation and accommodative monetary policy to help spur growth through higher private spending and infrastructure investments.28
Private consumption: Household consumption grew 5.1 percent year on year, an improvement on the 4.6 percent attained in the previous quarter. Easing consumer price inflation boosted spending, although a slowdown in tourism and leisure-related spending restrained the impact. This was due to unfavorable weather conditions that disrupted domestic mobility and brought about a higher incidence of flight cancellations.29
Trade: Exports recorded a contraction of 1.0 percent in the third quarter, a major reversal compared to the 4.2 percent growth in the second quarter. A sharp decline in the electronics products segment, especially semiconductors, which shrank by 17.9 percent, impacted the exports of goods. Services exports slowed as well, particularly due to the decline in air travel. Imports, however, grew faster at 6.4 percent, driven by services imports, marking the fourth consecutive quarter increase.30
Industrial activity: Manufacturing production in the Philippines grew by 2.8 percent year on year in the third quarter, with refined petroleum, food, and electrical equipment production contributing to most of the growth. This is, however, slower than the first and second quarter’s expansion of 4.5 and 3.6 percent, respectively. Manufacturing PMI in October remained above the 50.0 threshold at 52.9, with confidence across manufacturing sectors remaining robust, even though this was a small decline from 53.7 recorded in September.31
Labor: September saw the third consecutive month of improvement in the labor market, with the unemployment rate declining to 3.71 percent from 4.0 percent and 4.7 percent recorded in August and July, respectively. Sectors including administrative and support services, wholesale and retail trade, and manufacturing saw the largest addition in employment. The targeted year-end finalization of the government’s master plan for national employment could further improve the state of employment. The master plan, Trabaho Para sa Bayan (TPB), is a ten-year road map created to boost investments in priority sectors, improve workforce employability, and strengthen labor market governance, with the aim of driving sustainable economic growth and aligning skills with industry needs in the coming decade.32
Inflation: October’s inflation accelerated to 2.3 percent year on year on elevated food and utilities costs, higher than the 1.9 percent recorded in September. Despite the slight uptick in October, inflation numbers recorded within the third quarter were broadly lower than historically experienced since 2022. The improvement in inflation in the third quarter ensured that inflation remained within the central bank’s target of 2.0 to 4.0 percent. This allowed the central bank to potentially cut interest rates further after a reduction of 50 basis points in total at its last two meetings.33
Financial markets
Currency: The Philippines’ peso strengthened by about 5 percent over the third quarter. It has, however, depreciated since the US Fed rate cut was announced, which is in line with the broader recovery of the US dollar. The third-quarter gain was almost entirely reversed by mid-November 2024, although it may see a rebound soon, given the seasonal pick-up in overseas remittances ahead of the year-end festive holidays.34
Policy rate: The central bank cut its policy rate by 25 basis points to 6.0 percent in October, the second rate cut in 2024. The decision came as inflation remained within the central bank’s target range of 2.0 to 4.0 percent and appears to remain controlled moving forward. The cut will hopefully provide more support to the economy, and further rate cuts have not been ruled out.35
Capital inflows: In the third quarter, the Philippines experienced a remarkable surge in foreign investment approvals, reaching 146.75 billion pesos (US $2.49 billion)—a 434.4 percent increase compared to the same period in 2023. South Korea emerged as the top investor, contributing 53.72 billion pesos (US $0.91 billion) or 36.6 percent of the total commitments. The manufacturing sector attracted the lion’s share of investments, securing 70.57 billion pesos (US $1.20 billion), equivalent to 48.1 percent of the total, underscoring its pivotal role in driving the country’s economic momentum.36
Southeast Asia’s economies: Softening but still strong
Singapore
Singapore’s economic landscape is looking positive, and key indicators are robust. GDP expanded by 5.4 percent in the third quarter, marking its best quarterly performance since 2022. The manufacturing, wholesale trade, and finance and insurance sectors were key growth contributors. Manufacturing, in particular, rebounded strongly in the third quarter, with the global recovery in electronics demand providing strong support, reversing multiple contractions in recent quarters. This also enabled non-oil domestic exports (NODX) to yield a surprise upside (Exhibit 6). The labor market was at its strongest, with unemployment at its joint lowest in the past five years. Inflationary pressures, meanwhile, continued to ease.
Macroeconomic outlook
GDP: Singapore’s GDP expanded by 5.4 percent in the third quarter, surpassing the previous quarter’s growth of 2.9 percent. This also marked the strongest quarterly expansion since 2022. The manufacturing, wholesale trade, and finance and insurance sectors were key growth engines in the third quarter, contributing to two-thirds of overall GDP growth. Meanwhile, consumer-facing sectors, such as retail trade and food and beverages, saw contractions following slower tourist arrivals and weaker tourist spending.37
Consumption: Consumption expenditure in the third quarter picked up pace, growing 6.3 percent year on year, higher than the 5.5 percent growth in the second quarter. Both private and public consumption improved in the third quarter, recording 6.9 percent and 4.5 percent growth from 6.2 and 2.8 in the previous quarter, respectively.38
Trade: Singapore’s total merchandise trade growth moderated to 5.5 percent in the third quarter, with exports and imports seeing slower growth. The quarter’s performance paled compared to the second quarter of 2024, when overall merchandise trade recorded a very strong expansion of 10.0 percent. Despite the moderation, NODX, one of Singapore’s key trade performance markers, yielded a surprise upside of 9.2 percent growth in the third quarter after experiencing a shrinkage in every quarter in 2023 and 2024. Both the electronics and non-electronics segments propped up NODX in the third quarter.39
Industrial activity: The manufacturing sector was a bright spark in the third quarter, rebounding to expand by 11.0 percent after seeing continued contractions in recent quarters. All manufacturing clusters expanded, with electronics (15.4 percent), biomedical manufacturing (8.8 percent), and precision engineering (8.6 percent) being top-performing clusters over the quarter.40 Manufacturing PMI strengthened month by month throughout the third quarter and continued to remain in the expansionary zone. PMI gradually rose from 50.4 in June 2024 to the end of the quarter at 51.0 in September. October, however, saw a minor decline to 50.8, although this is believed to be a minor blip, with the outlook for the manufacturing sector remaining positive, supported by higher demand toward the year-end festive period.41
Labor: Singapore’s labor market continued to improve, with the third-quarter unemployment rate declining to 1.8 percent, the joint lowest rate recorded in the past five years. The market experienced 26,700 new jobs. The services sector mainly contributed to the growth, with more than 15,000 new jobs created compared to the second quarter. Retrenchments, meanwhile, declined during the third quarter. Hiring expectations in the fourth quarter appear stable, with services sectors particularly expected to boost hiring.42
Inflation: Inflation further eased in the third quarter as growth moderated to 2.2 percent from 2.8 percent and 3.0 percent in the second and first quarters, respectively. This easing was replicated in almost all categories, including food, transport, and communications, which were experiencing continued decline. Early indications for the upcoming fourth quarter signal a potential continued decline, as October’s inflation dropped to 2.1 percent, the lowest seen since March 2021.43
Financial markets
Currency: The Singapore dollar strengthened by 5.4 percent against the US dollar in the third quarter, at one point reaching a ten-year high as markets reacted to the US Fed’s interest rate cuts. Since October, however, the Singapore dollar has eased against the US dollar and may continue to wane with expectations that the US economy could experience a softer landing.44
Policy rate: In its quarterly meeting in October 2024, the Monetary Authority of Singapore (MAS) maintained the prevailing appreciation rate of the S$NEER policy band and left unchanged the width and level at which the currency band is centered. MAS believes that the current policy band will ensure medium-term price stability, with core inflation expected to ease further to around 2 percent as the end of 2024 approaches.45
Capital inflows: FDI net inflows saw a decline of 19 percent to US $35.01 billion (46.9 billion Singapore dollars) in the third quarter of 2024, while foreign exchange (forex) reserves increased by US $5.1 billion, reaching US $383.7 billion (514.16 billion Singapore dollars) during the same period.46
Thailand
Thailand’s economy continued to pick up pace, growing 3.0 percent in the third quarter, marking the third consecutive quarterly expansion. Strong investments, tourism, and exports helped drive growth in this quarter. Industrial production held steady and derived a marginal 0.1 percent growth—the first back-to-back quarterly growth since 2022 (Exhibit 7). Private consumption growth slowed despite inflation having moderated and the labor sector remaining robust.
The central bank unexpectedly cut its policy rate in October in a bid to further boost Thailand’s economy and raised its 2024 growth forecast from 2.6 percent to 2.7 percent.
Macroeconomic outlook
GDP: Thailand’s economy grew by 3.0 percent in the third quarter, faster than the 2.3 percent growth in the second quarter, supported by stronger investment, tourism, and exports performance. The services sector continued to drive growth, with the transportation and storage and the accommodation and food services segments attaining 9.0 and 8.4 percent growth, respectively. Construction rebounded and reversed the trend of three continuous quarters of contraction, growing 15.5 percent. Manufacturing remained flat, increasing 0.1 percent, while the agriculture sector contracted for the fourth straight quarter.47
Private consumption: Private consumption growth in the third quarter decreased to 3.4 percent from 4.0 percent in the previous quarter. Most expenditure categories saw a slowdown in spending in the third quarter, including food, utilities, clothing, vehicle purchases, and services such as healthcare, transport, and entertainment. Consumer confidence was at its lowest since the second quarter of 2023, with ongoing cost-of-living concerns and the subdued economic outlook as key drivers.48
Trade: Trade activities saw robust growth in the third quarter, with trade balance recording a trade surplus of US $5.8 billion from US $5.5 billion in the previous quarter. The exports sector continued its turnaround story, growing by 8.9 percent in the third quarter, an improvement from the 4.5 percent growth in the second quarter and the 1.1 percent contraction in the first quarter. Agricultural and computer and telecommunications exports saw healthy growth, particularly the computer segment, where the exports value doubled and increased by 146.5 percent. Imports also grew strongly, recording 11.3 percent growth in the third quarter compared to 1.2 percent in the prior quarter. All import categories saw an expansion, driven by a higher demand for materials to support exports and manufacturing production.49
Industrial activity: The manufacturing sector saw back-to-back quarterly growth for the first time since 2022, although the pace of expansion was marginal at 0.1 percent in the third quarter and lower than the 0.3 percent growth in the second quarter. Output was mixed across the manufacturing segments, with electronics, computers, machinery, and refined petroleum products recording higher growth. At the same time, motor vehicles, motorcycles, and construction materials, such as concrete, iron, and steel, saw slower production.50 PMI remained in expansionary territory in the third quarter, although the pace of expansion moderated with the index on a declining trend from 52.8 in July 2024 to 50.4 in September. The reading declined to 50.0 in October as manufacturing business conditions stagnated but saw marginal expansion to 50.2 in November.51
Labor: The unemployment rate in the third quarter fell marginally to 1.02 percent from 1.07 percent in the previous quarter. Although this represented a quarterly improvement, it was slightly higher than the 0.99 percent recorded in the same quarter in 2023. With structural changes continuing as sectors evolve, the critical need for workers to reskill and upskill remains. For example, the automotive manufacturing sector is shifting from producing internal combustion engine vehicles to EVs and will need a qualified workforce to work on EVs.52
Inflation: Inflation softened to 0.6 percent in the third quarter, a decline from 0.8 percent recorded in the previous quarter. This decline was largely attributed to softer price increases in key categories, such as food, beverages, housing, and utilities.53
Financial markets
Currency: The Thai baht rallied in the third quarter to appreciate to close to 12 percent against the US dollar, at one point reaching its highest level in 31 months against the greenback. The faster-than-expected strengthening of the currency led the central bank to intervene to stabilize the currency as concerns grew over the excessive impact of a strong baht on near-term growth—especially in critical economic engines such as exports and tourism. The baht has depreciated by about 6 percent since the end of the third quarter, incorporating the evolving global economics and geopolitical narratives following the conclusion of the US elections.54
Policy rate: Having kept the policy rate unchanged in its August 2024 meeting, the Bank of Thailand (BOT) unexpectedly cut it by 25 basis points to 2.25 percent in October. The move represented the bank’s first rate cut in over four years and is hoped to alleviate the debt servicing burden of borrowers and, at the same time, provide an impetus to revive the country’s sluggish economy. The next policy review is slated for December 2024.55
Capital inflows: In the third quarter, Thailand recorded an FDI inflow of 220.9 billion baht (US $6.2 billion), a strong uptick from 156.4 billion baht (US $4.4 billion) in the second quarter.56 This brings the FDI value for the first nine months to 546.6 billion baht (US $15.3 billion), a significant increase of 38 percent from the same period in 2023. The electronics, digital, and automotive sectors were key to driving FDI in the third quarter.57
Vietnam
Vietnam’s GDP grew 7.4 percent in the third quarter of 2024, its third-highest growth in the past five years. Strong production and exports performance and a rise in foreign investments propelled growth this quarter. FDI saw an increase in high-quality investments in sectors such as semiconductors, energy, and electronics, further cementing Vietnam as a credible investment destination. Inflation, meanwhile, eased this quarter.
Macroeconomic outlook
GDP: Vietnam’s GDP growth accelerated to 7.4 percent year on year in the third quarter from the revised 7.09 percent year-on-year growth in the second quarter. The strong performance was attained despite the severe impact of typhoon Yagi in September. This performance enabled the economy to grow by 6.82 percent year on year in the first nine months of 2024, inching closer to the government’s target growth of 7.0 percent for the year. The manufacturing and processing sectors were key growth drivers, having expanded by 11.4 percent, the highest rate recorded since 2019. The services sector expanded by 7.51 percent, mainly driven by strong tourism performance, while the construction sector was another notable contributor, growing by 9.11 percent.58
Private consumption: Private consumption continued its recovery and rose by 7.02 percent in the third quarter from 6.58 percent in the previous period, contributing 59.78 percent to the economy’s overall growth rate. Retail sales and tourism-related services increased by 8.4 percent year on year, close to pre-COVID-19 levels of 10.4 percent in 2019.59
Trade: Exports of goods recorded saw growth accelerated to 15.8 percent year on year in the third quarter from 10.6 percent in the second quarter. For the first nine months of 2024, Vietnam’s exports rose by 15.4 percent year on year to US $299.6 billion, while imports grew at a faster rate by 17.3 percent year on year at US $278.8 billion, indicating robust domestic activity. The United States was Vietnam’s biggest export market, accounting for a third of Vietnam’s exports, while China was Vietnam’s top import partner, accounting for 38 percent of total imports into Vietnam.60
Industrial activity: Growth in industrial activity accelerated to 9.59 percent in the third quarter from 8.55 percent in the previous quarter, despite a marked reduction in production in September. This was due to temporary business closures and supply chain delays following extensive flooding caused by typhoon Yagi. Processing and manufacturing sectors were key growth drivers, with 11.41 percent expansion from 10.39 percent growth in the second quarter. PMI, however, experienced the major brunt of typhoon Yagi, declining to 47.3 in September from 52.4 in August, signaling significant deterioration in manufacturing conditions following a spell of solid growth throughout 2024.
Labor: The unemployment rate fell marginally to 2.24 percent in the third quarter from 2.29 percent in the previous quarter. Meanwhile, the labor force stood at 52.7 million people, an increase of 114,100 from the previous quarter. Improved economic conditions, supported by strong trade performance, allowed more businesses to come onstream to absorb a larger workforce. Despite the positive development, the labor market continues to be deemed volatile as 33 million workers—a significant number—are still engaged in informal employment, representing over 60 percent of total employment.
Prices: Inflation eased marginally to 3.88 percent year on year for the first nine months of 2024, compared to 4.08 percent recorded in the previous quarter. The food and beverage services segment saw a larger increase of 4.0 percent in the first nine months of the year. The latest reading brings Vietnam’s inflation slightly lower than its 2024 target of 4.0 to 4.5 percent.61
Financial markets
Currency: The Vietnam dong stood at a record low against the greenback at the start of the quarter and strengthened by about 4 percent by the end of September. The gain, however, was almost completely reversed in October following the global recovery of the US dollar, coupled with a slowdown in Vietnam’s trade surplus.62
Policy rate: The central bank announced its intention to continue to pursue supportive monetary policies for the rest of the year. It plans to keep policy rates at current levels while keeping the option open for future rate cuts to support the recovery of economic activities impacted by the recent typhoon.63
Capital inflows: In the first nine months of 2024, FDI realized were US $24.7 billion, an increase of 11.6 percent over the same period in 2023. In September alone, Vietnam recorded an FDI inflow of more than US $4.26 billion, accounting for 17.2 percent of the total FDI registered in the first nine months of 2024. The country also saw a larger concentration of higher-quality investments, particularly in semiconductors, energy, and electronic products, which is expected to support the proliferation of innovation across Vietnam’s industries.64
In the spotlight
Southeast Asia: Pivotal in global supply chain diversification and trade corridors
Southeast Asia is increasingly becoming a focal point in the reconfiguration of global trade and supply chains. This transformation is driven by several factors, including geopolitical shifts, economic integration, and strategic investments in infrastructure. McKinsey’s insights reveal how the region is not only adapting to these changes but also positioning itself as a critical hub in the global trade network.
Global events such as the COVID-19 pandemic and the invasion of Ukraine exposed significant vulnerabilities in global supply chains, prompting companies to reconsider their reliance on single-source suppliers. Southeast Asia presents a compelling alternative: it offers a diverse manufacturing base, competitive costs, and a skilled workforce, making it an attractive destination for businesses looking to mitigate risks and enhance resilience.
Countries such as Malaysia, Thailand, and Vietnam are emerging as key players in this diversification strategy. Their robust infrastructures and favorable business environments attract multinational corporations seeking to establish or expand their manufacturing footprints. For instance, Vietnam’s electronics and textile industries have seen substantial growth, driven by investments from global giants looking to diversify their operations.65
Buttressing this is the Regional Comprehensive Economic Partnership (RCEP), which includes China and the ten Association of Southeast Asian Nations (ASEAN) countries.66 RCEP, the world’s largest trade agreement, reduces tariffs and streamlines trade regulations, fostering greater economic integration within the region. This economic integration positions Southeast Asia as a gateway for trade between East Asia, South Asia, and beyond. As tariffs decrease and market access improves, intraregional trade is expected to flourish, further solidifying Southeast Asia’s role in the global trade network. This shift is beneficial for local economies and global companies seeking to tap into new markets and consumer bases.
The development of new business corridors is another significant trend reshaping Southeast Asia’s role in global trade. Strategic investments in infrastructure are creating new economic corridors that enhance connectivity and facilitate smoother trade flows. The vast network of trade routes will link Asia with Africa, China, and Europe. Investments in ports, railways, and highways are not only improving regional connectivity but also integrating Southeast Asia more closely with global supply chains. Such projects are transforming the logistics landscape, making it easier and more cost-effective to move goods across borders.
Looking ahead, Southeast Asia’s role in global trade and supply chains is poised to become even more significant. Continued investments in infrastructure, coupled with economic integration through agreements such as the RCEP, will likely enhance the region’s attractiveness as a trade and investment destination. However, challenges remain. Political instability, regulatory differences, and infrastructural gaps can pose hurdles to seamless trade and investment. Addressing these challenges will require concerted efforts from governments, businesses, and international organizations to create a more conducive environment for trade and investment.
Southeast Asia is emerging as a pivotal region in the global trade and supply chain landscape. The region’s strategic location, economic integration, and infrastructure investments are transforming it into a vital hub for global commerce. As businesses and policymakers navigate the complexities of global trade, Southeast Asia’s role as a key player in supply chain diversification and trade corridors will continue to shape the future of international trade. The region’s ability to capitalize on these opportunities while addressing inherent challenges will determine its success in the evolving global economic order.
