Southeast Asia is home to several promising industries across its regional economy that will report quicker than the global average growth in 2023. Despite a concerning macroeconomic backdrop, various factors will continue to pull in investment and businesses to the region.
Southeast Asia, or the ASEAN (the Association of Southeast Asian Nations) region as more commonly referred to in Asia, is among the fastest-growing regions in the world. According to the Asian Development Bank (ADB), economic growth in Southeast Asia reached 5.5 percent in 2022.
However, a host of evolving and generally negative economic pressures is pushing down the growth forecast for the region by ADB – reflecting patterns elsewhere in the world – to 4.7 percent.
The International Monetary Fund (IMF) forecast for global growth was 3.2 percent for 2022 and 2.7 percent for 2023, meaning ASEAN is still forecast to grow substantially faster than the global average.
Despite the prevailing gloomy economic climate, Southeast Asia remains very attractive to foreign direct investment (FDI), and several industries look set to prosper in 2023. Trends of capital inflow into key sectors, such as tech, manufacturing, and infrastructure development, will likely continue while China’s ‘reopening’ will provide a much-needed boost for tourism and travel from the second quarter (Q2 2023).
ASEAN growth trends
The region is on course to become the world’s largest single market by 2030. This is reflected in the investment flows that have continued at a high level in recent years. ASEAN states are becoming increasingly open to international trade having incrementally removed barriers to inter- and intra-regional trade and investment.
The growth of Southeast Asia’s indigenous economies also offers a lucrative environment for foreign businesses, as also the sheer size of the regional population and workforce. ASEAN countries have a total population of 662 million people and a combined gross domestic product (GDP) of US$3.2 trillion.
Growth patterns will be boosted as economies and workforce arrangements become more formalized and more young people enter the labor market. The median age in Southeast Asia is 30.2 years, substantially less than in China (38.4) and Europe (44.1).
Finally, the ASEAN region has benefitted, and will likely continue to benefit, from a privileged geopolitical position. An intensifying rivalry between superpowers, the US and China, have prompted both nations to deepen their ties with the region.
China has considerable links with ASEAN economies and seeks to enhance them through increased infrastructure spending and by improving access to trade, such as through the Regional Comprehensive Economic Partnership (RCEP).