Southeast Asia quarterly economic review: Sustaining the momentum

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Southeast Asia’s economies continue to sustain their growth momentum in the first quarter 2024. GDP grew in all economies, with growth in Indonesia, Malaysia, the Philippines, and Singapore increasing during this period, while Thailand and Vietnam recorded slower growth (Exhibit 1).1 Strong domestic demand, backed by tight employment markets and stable prices, along with strong performance particularly in tourism and a recovery in exports markets helped sustained growth in this quarter.

In the first quarter 2024, most Southeast Asian economies continued to sustain their growth momentum.

The view for 2024 continues to be cautiously optimistic, in an external environment that continues to deliver mixed outcomes and present significant challenges. China, a key economic partner for the region, showed stronger performance in the first quarter 2024, which has propped up demand in Southeast Asia, while growth in the United States came in slower than expected.2 Ongoing geopolitical conflicts and tensions, as well as continued uncertainty and fragility in global markets, could pose challenges to the region.

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.

Key indicator details can be found in Exhibit 2.

The region broadly performed better in the first quarter 2024, backed by stronger exports and private consumption demand.

In the following section, we focus on the six specific countries in Southeast Asia, examining their macroeconomic conditions and financial markets.


Indonesia maintained a steady GDP growth rate in the first quarter 2024 at 5.11 percent, accelerating marginally from 5.04 percent in the previous quarter. Strong consumption, driven by higher public spending during elections and higher household spending over Ramadan, provided a boost to Indonesia’s economy this quarter (Exhibit 3). Industrial production picked up pace, while the employment market remained buoyant with unemployment at its lowest since 1997. The rupiah, meanwhile, weakened to historic lows, leading to the central bank intervening with a rate adjustment to stabilize the currency.

Private consumption was the key growth driver in the first quarter 2024 for Indonesia, given higher spending during elections and Ramadan.

Macroeconomic outlook

GDP: Indonesia recorded 5.11 percent y-o-y growth in the first quarter 2024, marginally higher than the 5.04 percent growth observed in the preceding quarter.3 Higher public spending from the general elections and increased household consumption from Ramadan bolstered economic activity during the quarter.

Government spending spiked by 20.0 percent y-o-y, while household consumption—which makes up over half of Indonesia’s GDP—grew 4.91 percent y-o-y during the first quarter 2024. Investment growth, however, continues to remain tepid, as it slipped to 3.79 percent in the first quarter 2024 from 5.02 percent in the fourth quarter 2023, as investors adopt a wait-and-see approach on investment decisions in lieu of the appointment of a new government.

Private consumption: Private consumption grew by 4.91 percent y-o-y in the first quarter 2024—an improvement from the 4.5 percent attained in the previous quarter—on account of higher spending during the holy month of Ramadan. Accommodation and food service activities, as well as wholesale and retail trade, also contributed to consumption expenditure growth in this quarter.4

Trade: Indonesia posted higher than expected in trade surplus in April 2024 at US $3.56 billion, with exports rising 1.72 percent from a year earlier to US $19.62 billion. April’s export expansion was Indonesia’s first for the past 11 months, a small relief for the exports sector that has been hit hard the past year following a decline in commodity prices and weak global trade.5

Industrial activity: Industrial production growth is estimated to have picked up pace in the first quarter 2024 at 2.5 percent, compared to 1.9 percent in the previous quarter. Most sectors showed growth, with the largest contributions by manufacturing, trade, construction, and mining sectors. Agriculture contracted due to a decrease in agricultural commodity production at the beginning of the year, especially food crops, attributed to the El Niño phenomenon.6 Manufacturing PMI has remained in expansionary zone for the past 32 months, although April 2024’s return of 52.9 is lower than March’s figure, which stood at 54.2. Businesses widely reported that the demand for manufactured goods was broadly centered on the needs from the domestic market.7

Labor: Indonesia’s unemployment rate stood at 4.82 percent in February 2024, the lowest since 1997, indicating a strong recovery in the labor markets back to prepandemic levels. The labor force participation rate increased to 69.8 percent from 69.3 percent in the prior year, while the employed population grew by 2.56 percent to 142.18 million, mostly in food accommodation and beverages, construction, and agriculture sectors.8

Inflation: Inflation eased to 3.0 percent in April 2024 from 4.97 percent in the previous quarter. This was driven by a decline in food prices, as a favorable harvest season stabilized food prices across the archipelago.9 The latest numbers brings inflation back to within the government’s target range of 1.5 to 3.5 percent for 2024.

Financial markets

Currency: The Indonesian rupiah has depreciated almost 4 percent since early 2024, reaching 16,300 rupiah against the US dollar by the end of April, its weakest since 2020, leading to the central bank to intervene with a surprise rate hike to defend the currency. The rupiah extended some gains after the announcement, but it still remains above 16,000 per US dollar and could stabilize at around 16,200 per dollar in the second quarter 2024, gradually strengthen to 16,000 to the US dollar in the next quarter, and to 15,800 to the US dollar by the fourth quarter 2024.10

Policy rate: For the first time since October 2023, Bank Indonesia (BI) raised benchmark interest rates by 25 basis points to 6.25 percent in April 2024. The move aims to stabilize the rupiah, which plunged to historic lows against the US dollar recently.

Capital flows: FDI inflows rose 15.5 percent to US $12.5 billion in the first quarter 2024 versus 5.3 percent growth in the previous quarter. The manufacturing sector is the largest FDI recipient, accounting for more than 50 percent of FDI inflow, with China, Hong Kong, Japan, Singapore, and the United States being country’s top FDI contributors.11


Malaysia’s economic outlook for 2024 looks brighter following a strong performance recorded in the first quarter 2024. GDP grew at a rate of 4.2 percent in the first quarter—higher than the 2.9 percent growth recorded in the previous quarter—driven by stronger private expenditure and a positive turnaround in exports (Exhibit 4).

Malaysia's exports rebounded with higher exports of manufactured and mining products, while consumption remained stable.

Exports rose by 2.2 percent y-o-y in the first quarter, reversing three consecutive quarters of contraction. Household spending was higher amid continued growth in employment and wages. Stronger investment activities were supported by higher capital spending by both the private and public sectors.

Macroeconomic outlook

GDP: GDP in the fourth quarter 2023 accelerated to 4.2 percent from 2.9 percent recorded in the previous quarter. This was driven by stronger private expenditure and a turnaround in exports. In terms of supply, the economy’s growth was propelled by expansion in the services, construction, and mining sectors at 4.7 percent, 11.9 percent, and 5.7 percent, respectively. A bright spot was the construction sector, which grew three times faster by 11.9 percent in the first quarter from 3.6 percent in the previous quarter. This was driven by more rapid progress in civil engineering projects and stronger support from special trade and residential activities.12

Private consumption: Private consumption expanded by 4.7 percent y-o-y in the first quarter 2024, from 4.2 percent in the preceding three-month period. Easing cost pressures and an improvement in the labor market allowed households to continue to spend to support consumption.13

Trade: Malaysia’s exports increased by 2.2 percent y-o-y to 362.41 billion ringgit (US $77.18 billion) in the first quarter 2024 compared to the previous year on the back of higher exports of manufactured and mining goods. Exports of iron and steel products; machinery; equipment and parts; metal manufacturers; and crude petroleum and liquefied natural gas (LNG) recorded notable increases. In terms of markets, growth was supported by increased exports to the Association of Southeast Nations (ASEAN), Japan, and the United States. Imports recorded double-digit growth of 13.1 percent y-o-y to 328.19 billion ringgit (US $69.87 billion) due to robust imports of capital and intermediate goods meant for the manufacturing of products for exports.14 Going forward, the recovery in exports is expected to gather momentum supported by the global tech upcycle and continued strength in nonelectrical and electronics goods. Tourist arrivals and spending are also poised to rise further.

Industrial activity: The industrial production index (IPI) increased by 3.3 percent in the first quarter 2024 from 0.8 percent in the previous quarter, supported by positive momentum in all subsectors and led by electricity, mining, and manufacturing. The manufacturing sector experienced a rebound across both the electrical and electronic (E&E) and non-E&E industries and stronger construction-related activities. PMI remained in the contractionary zone, although an improvement of 48.4 in March 2024 to 49.0 in April 2024 may be a sign that any weakness seen in the manufacturing sector could be bottoming out.15

Labor: In the first quarter 2024, the unemployment rate remained steady at the prepandemic level of 3.3 percent, while the labor force participation rate recorded a historic high of 70.2 percent.16 Employment rose to 16.4 million persons in the first quarter 2024 from 16.35 million persons in the previous quarter.17 Increase in foreign investments, higher infrastructure activities, rebound in exports, and the steady recovery seen in the tourism sector have helped to support the labor market.18

Inflation: Inflation remained moderate at 1.7 percent in the first quarter 2024, a marginal increase from the 1.6 percent in the previous quarter. The first quarter saw policy adjustments resulting in higher electricity (high usage) and water tariffs, with the latter seeing a hike of 20.8 percent. Core inflation, meanwhile, moderated to 1.8 percent from 2.0 percent in the previous quarter, largely driven by continued easing in the food and beverages segment.19

Bank Negara (the country’s central bank) is projecting inflation for rest of 2024 to remain moderate between 2.0 and 3.5 percent, which broadly reflects stabilizing demand and contained cost pressures. The outlook for the rest of the year could also be dependent on the implementation of domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments.20

Financial markets

Currency: The ringgit has depreciated by 2.4 percent against the US dollar in the first five months of 2024, in line with the movements of other regional currencies. Shifting expectations of monetary policy paths (particularly of the Unites States) and ongoing geopolitical tensions have led to this heightened volatility in both capital flows and exchange rates across the ASEAN region, including the ringgit. The coordinated actions undertaken by the government to encourage repatriation and the conversion of foreign investment income by government-linked companies (GLCs) and government-linked investment companies (GLICs), however, have helped to cushion the pressure on the ringgit to some extent.

Policy rate: The central bank has thus far in 2024 held its benchmark overnight policy rate steady at 3 percent, citing improving domestic demand, favorable labor market conditions, and continued recovery in global trade. While higher economic activity in the first quarter justifies a supportive monetary policy, the central bank remains vigilant of the downside risks from an escalation of geopolitical tensions, higher than anticipated inflation, and global financial markets’ volatility.21

Capital flows: Net FDI inflows declined drastically from 19.6 billion ringgit (US $4.17 billion) in the fourth quarter 2023 to 5.5 billion ringgit (US $1.17 billion) in the first quarter 2024. This was the lowest recorded since the second quarter 2023 following reduced inflows in equity and investments into the country.22

The Philippines

The Philippine economy grew at 5.7 percent in first quarter 2024, marginally higher than the 5.6 percent growth in the fourth quarter 2023.23 This, however, is lower than the national target of between 6 to 7 percent for 2024. The external sector saw a rebound fueled by a recovery in electronic shipments, with the industrial sector being another bright spot driven by strong domestic manufacturing performance.

Household consumption grew at 4.6 percent y-o-y this quarter, the slowest pace of growth since the third quarter 2010, with inflation continuing to remain at elevated levels (Exhibit 5).24

The Philippine's exports rebounded, fueled by a recovery in electronic shipments, while private consumption growth slowed.

Macroeconomic outlook

GDP: GDP grew at 5.7 percent y-o-y in the first quarter 2024, slightly higher than the 5.6 percent growth in the previous quarter. This was, however, slower than the same period last year where the economy grew at 6.4 percent, and the latest reading is lower than the government’s target growth range of 6.0 percent to 7.0 percent.

The country’s economic expansion in the first quarter of the year was broad based as all major production sectors registered positive growth, with the industry sector accelerating by 5.1 percent. The services sector likewise posted an expansion of 6.9 percent driven by the double-digit growth of the accommodation and food services at 13.9 percent, following a sustained recovery of tourism-related activities. The agriculture sector, meanwhile, saw a minor growth of 0.4 percent despite the adverse impact of El Niño on agricultural production this quarter.25

Private consumption: Household consumption recorded 4.6 percent growth in the first quarter 2024, slowing from 5.3 percent growth in the fourth quarter 2023.26 This was the slowest growth rate since the third quarter 2010 as the country’s continued elevated inflation levels brought about more cautious spending.

Trade: Exports rebounded to grow 7.5 percent y-o-y in the first quarter 2024, after contracting 2.5 percent y-o-y in the previous quarter. Growth was fueled by a recovery in shipments of electronic products including semiconductors, while services exports saw an increase of 8.9 percent y-o-y, driven by business services, telecommunications, and travel. Imports, meanwhile, grew at 2.3 percent y-o-y during the quarter, lower compared to the 2.9 percent y-o-y growth in the previous quarter.27

Industrial activity: Manufacturing production in the Philippines grew by 4.5 percent y-o-y in the first quarter 2024 with electronics, food products, and chemicals contributing to most of the growth. Manufacturing PMI rose to 52.2 in April 2024 from 50.9 in March 2023, the strongest improvement recorded in the past five months. Stronger global demand is boosting prospects, and firms have already been prompted to raise their purchasing activity and build inventories.28

Labor: The unemployment rate stood at 3.9 percent in March 2024, an uptick from 3.5 percent in February 2024. Most of the decline was attributed to the agriculture sector, which saw 318,000 fewer jobs during this period, as production suffered due to the effects of El Niño. The services sector, meanwhile, continued as the top sector in terms of the number of employed persons with a share of 61.4 percent of the 49.15 million employed persons.29

Inflation: There was an uptick in inflation in April 2024 to 3.8 percent from 3.7 percent in March. This uptrend in the overall inflation was primarily influenced by the higher prices for food and nonalcoholic beverages, which grew at 6.0 percent y-o-y from 5.6 percent y-o-y in March 2024. The increase underscores the need for vigilance toward ensuring food security amid global geopolitical tensions and potential impact of climate change and El Niño on food production.30

Financial markets

Currency: The Philippine peso has been on a downward trend against the US dollar since the early 2024, reaching as low as 57 peso per US dollar this quarter, its weakest performance since October 2022. This follows a similar trend amongst currencies in the region, which have fallen against the greenback following the US Federal Reserve Board’s decision to delay any policy rate cuts.

Policy rate: The Philippine central bank kept its benchmark interest rate steady at 6.5 percent in its monetary board meeting in May 2024, extending the policy pause as inflation outlook continues to lean towards the upside. The bank emphasized that policy rates would have to stay “sufficiently tight” until a sustained downward trend in inflation becomes evident and inflation is consistently within its target range.31

Capital inflows: The Philippine’s FDI inflows reached a two-year high in February 2024 to US $1.4 billion, a 29.3 percent rise from the same period a year before. Almost 90 percent of the FDI inflows came from the Netherlands, with investments directed mostly to the financial and insurance industry (90 percent of all equity capital).32

Aerial view of Bangkok at sunset stock video still

Southeast Asia’s economies: Softening but still strong


Singapore’s economy grew by 2.7 percent y-o-y in the first quarter 2024, faster than the 2.2 percent growth recorded in the previous quarter. This represents the strongest growth recorded on a y-o-y basis since the third quarter 2022, although a different read emerges when looked at a quarter-on-quarter (q-o-q) basis where this is the slowest growth since the first quarter 2023.

Consumption was boosted from “temporal boosts” such as the Taylor Swift concerts, while the external economy, including exports, saw a rebound. The industrials sector grew slower at 1.4 percent y-o-y in the first quarter 2024 compared to the prior quarter’s growth of 1.7 percent (Exhibit 6). Unemployment remains consistent at 2.1 percent, while inflation remains stubbornly elevated at 3.0 percent this quarter and is expected to remain elevated until at least the fourth quarter this year.

In Singapore, both exports and industrial activity saw an uptick in the first quarter 2024.

Macroeconomic outlook

GDP: Singapore’s economy accelerated to 2.7 percent y-o-y in the first quarter 2024 from 2.2 percent y-o-y, according to the Ministry of Trade and Industry.33 The improvement stemmed from the services sector, which grew 3.2 percent in the first quarter 2024 from 2.0 percent in the previous quarter, with strong performance seen in wholesale and retail trade, and in the information and communication subsectors. The government expects growth recovery in 2024 to be supported by a gradual improvement in external-led sectors and a strong contribution from services industries, including tourism.34

Consumption: In the first quarter 2024, consumption expenditure grew by 5.8 percent y-o-y, faster than the 2.5 percent at which it grew in the fourth quarter 2023. Both private and public consumption fueled this growth, with the former increasing by 53.8 percent and the latter by 6.0 percent. A slew of high-profile concerts by Coldplay and Taylor Swift likely provided a “temporal boost” to consumer-facing industries, including hospitality and entertainment-related activities in this quarter.35

Trade: Singapore’s total merchandise trade rebounded with a 4.8 percent y-o-y increase in the first quarter 2024, reversing a 2.1 percent decline from the previous quarter. This growth was driven by rises in both oil trade (up 3.4 percent) and non-oil trade (up 5.2 percent). Merchandise exports grew by 4.4 percent, building on a modest 0.2 percent increase from the previous quarter. Merchandise imports surged by 5.3 percent, recovering from a 4.7 percent drop in the prior quarter. The growth was supported by increases in both oil imports (up 2.1 percent) and non-oil imports (up 6.1 percent), with higher imports of electronics and nonelectronics goods.36

Industrial activity: The industrial sector lost some steam and grew only 1.4 percent y-o-y in the first quarter 2024, decelerating from the fourth quarter 2023’s 1.9 percent increase; both manufacturing and construction output grew less than in the prior quarter. The manufacturing sector contracted by 1.8 percent y-o-y in the first quarter, a reversal from the 1.4 percent growth in the previous quarter. The weak performance of the sector was mainly due to output declines in the biomedical manufacturing, electronics, and general manufacturing clusters. Growth in the construction sector came in at 4.1 percent y-o-y, extending the 5.2 percent expansion in the fourth quarter of last year. While private sector construction output fell, it was more than offset by an increase in public sector construction output.37 PMI fell from 55.7 in March 2024 to 52.6 in April, although it remained in the expansionary zone.38

Labor: Singapore’s unemployment rate was at 2.1 percent in the first quarter 2024, marginally higher than the 2.0 percent in the previous quarter. Retrenchments fell to 3,000 in the first quarter of 2024 from 3,460 in the preceding quarter. The decrease in retrenchments was broad based, with retrenchments falling in the services (from 2,520 to 2,300), manufacturing (from 780 to 600), and construction (from 150 to 100) sectors. Total employment expanded by 9,800 on a q-o-q basis in the first quarter 2024, largely driven by expansion in the services sector.39

Inflation: Consumer price index (CPI) inflation rose by 3 percent y-o-y in the first quarter 2024, moderating from the 4 percent increase in the previous quarter. Most CPI categories saw y-o-y price increases, driving up CPI-All Items inflation. Notable rises included food prices (up 3.4 percent) due to higher costs for food services and noncooked items, and healthcare costs (up 4.7 percent) owing to more expensive outpatient and hospital services.40

Inflation has fallen from its peak of 5.5 percent in early 2023 and is now within the Monetary Authority of Singapore’s (MAS) expectations of 2.5 to 3.5 percent.41

Financial markets

Currency: The Singapore dollar has weakened about 2 percent against the US dollar after the first quarter 2024, primarily due to the US Federal Reserve Bank adjusting its interest rate expectations based on robust US economic data, strengthening the US dollar against most currencies.42

Policy rate: In its second quarterly meeting for the year in April 2024, the MAS kept the policy rate unchanged and has maintained its exchange rate policy band, known as the Singapore dollar nominal effective exchange rate, or S$NEER.43 MAS has left monetary policy unchanged since October 2022, when the central bank recentered the midpoint of its band. Analysts predict that the central bank could keep its policy rate unchanged in the next quarter, as inflation could remain elevated for the next few months, potentially easing only by the fourth quarter 2024.44

Capital inflows: FDI inflows declined by 3.81 percent to US $32.7 billion in the first quarter 2024 from US $34.0 billion in the fourth quarter 2023, while foreign exchange (forex) reserves increased by US $12 billion, reaching US $354 billion in the first quarter 2024 from US $342 billion previously.45


Thailand’s economy recorded 1.5 percent y-o-y GDP growth in the first quarter 2024, a decline from 1.7 percent y-o-y growth recorded in the previous quarter. This marks the slowest rate of expansion among ASEAN-6 member countries. Private consumption and private investment supported growth this quarter as exports, public investment, and government expenditure contracted (Exhibit 7).

Thailand recorded the slowest growth among ASEAN economies due to a contradiction in exports and industrial production.

The outlook for rest of 2024 remains tepid as Thailand’s economy faces downside risks from both at home and abroad, including an elevated household and corporate debt; agricultural disruption due to potential floods; and geopolitical and global financial market risks. The NESDC expects the Thai economy to expand by 2.0 to 3.0 percent y-o-y in 2024, down from the previous forecast of 2.2 to 3.2 percent y-o-y.46 Growth could be supported by expansions in government expenditure and public investment, coupled with an ongoing recovery in the tourism sector and favorable growth in private consumption and investment.

Macroeconomic outlook

GDP: Thailand’s economy grew by 1.5 percent y-o-y in first quarter 2024, driven by the country’s booming tourism sector, which accounts for nearly 20.0 percent of its GDP. This is, however, lower than the 1.7 percent growth in the fourth quarter 2023 as weak exports posed a major drag on the economy. The weak exports led to reduced demand in several economic sectors, such as the agriculture and the industrial sectors, which declined 3.5 percent and 3.0 percent, respectively.

Private consumption: Private consumption was the growth driver in first quarter 2024, expanding by 6.9 percent y-o-y, albeit at a slower pace than the 7.4 percent expansion recorded in the previous quarter. Spending on nondurable goods softened as the Easy E-Receipt campaign came to an end, while expenditure on durable goods, including vehicles, deteriorated following more vigilant lending by financial institutions.47

Trade: After a rebound in the fourth quarter 2023, exports contracted by 1 percent y-o-y in the first quarter 2024 due to weak external demand. Imports also contracted by 3.2 percent y-o-y after 6.1 percent increase in the previous quarter.

Industrial activity: Industrial production contracted for 16 consecutive months and declined by 3.5 percent y-o-y in first quarter 2024, albeit a smaller contraction compared to 4.7 percent decline recorded in the fourth quarter 2023. In particular, the manufacturing sector remained weak as it shrunk by 3 percent, which marked a sixth consecutive quarterly contraction. This highlights an urgent need for Thailand to shift toward higher tech sectors and value add its exports, given that its manufacturing sector is dominated by aging industries that are less in demand in the today’s global market.48

The PMI remained in the contractionary zone for nine straight months in April 2024 as it fell from 49.1 in March to 48.6 in April. It indicates a further worsening of the manufacturing sector’s performance as new orders fell for a survey-record tenth month in succession, resulting in a renewed drop in output and the steepest decline in purchasing activity since the COVID-19 pandemic.49

Labor: The first quarter 2024 unemployment rate inched up slightly at 0.98 percent compared to 0.81 percent in the fourth quarter 2023. According to Thailand’s national statistics office, the number of employed workers declined slightly from 40.2 million to 39.6 million q-o-q due to a lower demand for workers in the agriculture industry, which had experienced severe drought. The number of nonfarm workers, however, increased by 2.2 percent q-o-q, particularly those in the hospitality and restaurant sectors which ride on the growth in Thailand’s tourism sector.50

Inflation: Inflation decreased by 0.8 percent y-o-y in the first quarter 2024, continuing a downward trend in prices, with January 2024 seeing the lowest level of inflation in nearly three years. Lower food prices, the effect of energy subsidies, and a high base effect from the previous year drove the quarter’s decline.51 The country’s inflation is estimated to average 0.6 percent in 2024 and 1.3 percent in 2025, supported by an extension of government energy subsidies and the excess supply in selected food items.

Financial markets

Currency: The Thai baht weakened by 7.8 percent against the US dollar in the first quarter 2024, marking the second-largest depreciation in Asia, trailing only the Japanese yen. This movement aligns with regional currencies, primarily driven by the strength of the US dollar. The Bank of Thailand expects the Thai baht to strengthen against the greenback in the second half of 2024, aligning with the expectation that growth will pick up pace on the back of stronger tourism performance and private consumption, and higher public spending.52

Policy rate: The Bank of Thailand kept its key interest rate steady at 2.5 percent in its April 2024 meeting, extending its pause for the third consecutive meeting. The current policy interest rate remains consistent with its overall focus to sustain growth, while ensuring longer-term macrofinancial stability in the country.53

Capital inflows: FDI inflows more than doubled to US $4.6 billion in the first quarter 2024 from US $1.6 billion in the previous quarter.54 Forex reserves marginally declined by US $1.65 billion to US $199.0 billion this quarter.55


Vietnam’s economy eased in the first quarter 2024, while GDP grew slower at 5.6 percent compared to the previous quarter's 6.7 percent. The manufacturing and services sectors led the quarter’s growth, buoyed by robust growth in tourism. Private consumption remained steady and is poised for a strong expansion throughout 2024. Exports surged by 18 percent, supported by key sectors like electronics and textiles, resulting in a healthy trade surplus (Exhibit 8).

Vietnam's GDP growth was mainly supported by sharp export growth, while private consumption remained stable.

Inflation, however, continued to rise, driven by global price increases and impending minimum wage hikes. The Vietnamese dong depreciated against the US dollar, with expectations of further weakening. The central bank maintained policy rates to support growth but might consider adjustments later in the year in response to inflationary pressures.

Macroeconomic outlook

GDP: Vietnam’s economy grew slower at 5.6 percent y-o-y in the first quarter 2024 from 6.7 percent y-o-y growth in the fourth quarter 2023. Economic activity was led by the manufacturing and services sectors, which expanded by 6.3 percent and 6.1 percent, respectively. Tourism-related sectors performed well, supported by favorable visa policies and tourism stimulus policies. International visitors reached more than 4.6 million arrivals; a 72 percent rise compared to the same period in 2023.56

Private consumption: Private consumption expenditure remains stable and rose by an estimated 4.9 percent in the first quarter 2024, similar to the growth in the previous period. It is anticipated to exhibit robust growth throughout 2024 as real economic expansion resumes its more stable trajectory. According to the latest report by Fitch Solutions, household spending in real terms is projected to grow by 7.1 percent y-o-y in 2024. This growth mirrors a return to the stable trajectory observed before the COVID-19 pandemic, averaging around 6.6 percent during the 2015 to 2019 period and is attributed to a combination of factors, which include the normalizing of inflation and a tight labor market.57

Trade: Exports grew by 18 percent and was the main contributor to GDP expansion in the first quarter, following rise in key exports segments of electronics and textiles. Goods exports grew sharply despite Red Sea shipping disruptions, which raised cargo costs substantially.58 Exports to the United States, Vietnam’s largest export market, performed well, totaling US $25.77 billion, having reaped the benefits from the depreciating Vietnamese dong.59 Imports, meanwhile, rose by 17.08 percent, resulting in an overall trade surplus of 19.16 percent.

Industrial activity: Industrial activity slowed in the first quarter, achieving 6.2 percent y-o-y growth after attaining 7.8 percent y-o-y growth in the fourth quarter.60 Manufacturing PMI fell into contractionary zone, recording 49.9 in March 2024 from 50.4 in February 2024. Output and new orders both ticked lower amid competitive pressures and geopolitical uncertainty.61

Labor: Vietnam’s labor market continues to recover in the first quarter 2024, with employment increasing by 217,000 compared to previous quarter, totaling 51.7 million people. According to the Ministry of Labour, Invalids, and Social Affairs, hiring needs increased as companies received new orders, expanded operations, and undertook new major projects.61 Manufacturing and food processing, electrical equipment manufacturing, and leather and related products manufacturing were three industries that saw higher employment needs.63 The unemployment rate remained stable at 2.24 percent in the first quarter 2024, close to 2.26 percent recorded in the fourth quarter 2023.

Prices: Inflation has remained above the 3 percent mark since September 2023. Vietnam’s inflation grew 3.77 percent y-o-y in the first quarter 2024 from 3.5 percent in y-o-y in the previous quarter. This uptick in inflation is attributed to an escalation in the prices of raw materials, consumer goods, and oil. Vietnam’s inflation for 2024 is forecast to go up to 4.8 percent y-o-y, according to the State Bank of Vietnam and Ministry of Finance. This inflationary pressure could be further exacerbated by price increases in essential sectors, such as healthcare, education, and electricity,64 while the implementation of a 6 percent increase in minimum wages in July 2024 could add further inflationary pressure.65

Financial markets

Currency: The dong depreciated 2.1 percent y-o-y against the US dollar in first quarter 2024 and is expected to remain weak in the first half 2024. Ongoing geopolitical tensions, solid US manufacturing, and labor market data could cast a shadow over the quantum of the Federal Reserve Bank’s rate cuts this year, allowing the US dollar to continue to remain strong over the coming months, adding downward pressure on the dong.

Policy rate: The central bank has kept policy rates unchanged so far in 2024 and will likely keep its benchmark interest rate steady through the first half 2024 as it seeks to stimulate further economic growth. Inflationary pressures from cost-push factors, such as crude oil and commodities and future minimum wage increases, might however prompt a revisit of a policy rate hike toward the end of the year.66

Capital inflows: Vietnam had attracted US $6.2 billion of FDI in the first quarter 2024, a rise of 13.4 percent y-o-y. The manufacturing and processing industry emerged as the primary recipient of FDI, attracting a total registered capital of US $3.93 billion, albeit experiencing a slight decrease of 1.3 percent from the same period last year. The real estate sector followed closely with a substantial increase of 2.1 times compared to the previous year, garnering total registered capital of US $1.58 billion. Additionally, investments were observed in the wholesale and retail industry, as well as in science and technology, with investments of US $224.8 million and US $190.2 million, respectively. Singapore continues to remain the leading investor in Vietnam while the capital city of Hanoi emerged as the top FDI destination, witnessing an influx of US $970.8 million, a remarkable increase of 6.1 times over the same period last year.67

In the spotlight

Structural segmentation: A new strategy for global companies in a geopolitically complex world

Escalating geopolitical conflicts and competition are causing multinational companies to reevaluate their global presence, with between 60 and 70 percent of business leaders citing geopolitics as the top risk to global growth.68Can your company remain global and if so, how?,” McKinsey Quarterly, May 17, 2024.

To build resilience under these circumstances, some organizations are opting to adapt their business operations to mitigate these risks and secure value, say McKinsey authors. That strategy, called structural segmentation, helps stabilize growth by allowing companies to adapt to legal, regulatory, and economic shifts while maintaining a global footprint. Companies can implement structural segmentation across six dimensions:

  1. Reshaping production and supply chains for resilience
  2. Ring-fencing research and development
  3. Derisking technology stacks and data lakes
  4. Creating decision making distance through legal entities
  5. Safeguarding capital invested in geopolitically distant regions
  6. Securing people and connections

Broadly, the authors found that businesses typically align to one of two postures—recommitting to a single global strategy or moving toward structural segmentation—and use it to guide decision making across each of the six dimensions. That said, companies do have the flexibility to follow a singular approach across all areas or adopt a mixed set of tactics.

Needless to say, structural segmentation comes with its challenges. Companies that adopt this strategy may have to face replicating supplier networks in new markets and the no mean feat of maintaining a unified corporate culture across localities. Neither is structural segmentation a magic formula to eliminate all risk. Geopolitically distant regions by their nature present risks as well as opportunities. Multinational companies must be prepared for greater scrutiny of their operating models globally, no matter how thoughtful a segmentation approach they may employ. But structural segmentation tends to be today’s logic, one that business leaders are exploring to potentially secure growth in fragmented times.

The first quarter of 2024 boded well for Southeast Asia. The region sustained its growth trajectory, with Indonesia, Malaysia, the Philippines, and Singapore recording stronger growth in this first quarter compared to the previous quarter. Robust performance in tourism was one the key contributory factors driving growth across most markets. Trade appeared to be turning the corner with promising outcomes seen across most markets. Labor markets across the region remained strong, and sectors such as tourism showed signs of recovery, supporting the employment market. The effects of climate change, however, had minor adverse impact on agricultural employment in the Philippines and Thailand. As the year progresses, it remains to be seen how the region will fare amid persisting geopolitical uncertainties and the changing conditions that present.

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