BofA says ASEAN enters 2025 in a strong position for growth, says By Investing.com

Investing.com – ASEAN economies enter 2025 in a strong position for growth, BofA analysts said in a note, citing robust domestic activity, improving labor markets, rising exports and recovering tourism.

However, the brokerage noted that risks from U.S.-related trade disruptions remain a major source of uncertainty as President-elect Donald Trump prepares to impose more trade tariffs. This is expected to have an impact on export-dependent economies in the region.

Still, BofA expects average gross domestic product growth to remain broadly stable in 2025, at about 4.9% year-over-year, the same as in 2024.

The Association of Southeast Asian Nations is made up of 10 member states, including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, which account for much of the bloc’s economic power.

Of these, BofA expects Vietnam’s economy to grow the most in the first half of 2025, with GDP at 6.8%, compared to a 7% increase in 2024.

Indonesia – the bloc’s largest economy – is expected to post GDP growth of 5.3% by mid-2025, up from 5.0% last year, while Singapore is expected to lag its regional peers at 2.6%, compared with 3.8% in 2024.

BofA analysts said growth across the region is expected to be supported by a healthy labor market, while a recovery in tourism should also help.

Steadily falling inflation represents a brighter outlook for ASEAN economies as price pressures across the region have eased in 2024 due to higher interest rates.

On the other hand, a flatter monetary easing cycle in the region could slow growth. Regional central banks are expected to be more cautious about cutting interest rates as the Federal Reserve’s rate-cutting plans ease.

The biggest risks to growth are the trade unrest in the USA

BofA analysts said the biggest source of uncertainty for ASEAN is the prospect of increased US trade tariffs as well as a looming trade war between the US and China.

The region is heavily dependent on trade with both countries, so the risk of expansion is high.

Universal trade tariffs in the US are likely to be the biggest impact on the region, as are increasing pressures on the Chinese economy.

Vietnam and Malaysia are most exposed to trade headwinds, while Thailand and Singapore will see a moderate impact, BofA said.

Indonesia and the Philippines will experience comparatively less severe impacts due to their domestically oriented economies.