Economics

DBS Focus
ASEAN-6 2024 Outlook: Cautious optimism
Group Research January 2024

30
Chua Han Teng, CFA • ASEAN-6 is expected to benefit from early
Economist
hantengchua@dbs.com signs of a turnaround in the electronics
trade cycle and tourism in 2024

• FDI inflows into ASEAN-6, as proportion of

world inflows, have exceeded China in the
past two years

Radhika Rao • Inflation will remain within target.

Senior Economist Exogenous shocks are the key wild card
radhikarao@dbs.com

• Central banks are unlikely to be in a hurry to

front run the US Fed

• Real rates are back in the black, with the

Please direct distribution queries to
Violet Lee +65 68785281
violetleeyh@dbs.com
ASEAN-6:
Indonesia, Malaysia, Philippines,
Singapore, Thailand, Vietnam
scale to narrow in 2024
• Indonesia is gearing up to elections in
February, while Singapore undergoes a
leadership transition
ASEAN-6 countries

Combined statistics in 2022: • Indonesia: A shift in the political leadership

Nominal GDP: USD3.5 trillion
Population: 601 million
Exports: USD1.9 trillion
Related reports
2024 Outlook: Soft landing?
Singapore Outlook 2024: A year of renewal
• Malaysia: Reforms are on the cards
• Philippines: Finding balance
• Singapore: A year of renewal
• Thailand: New government, policy
challenges
• Vietnam: Cyclical upturn, strong FDI
prospects

Indonesia 2024 Outlook: Higher gear

Refer to important disclosures at the end of this report

ASEAN-6 2024 Outlook: Cautious optimism

The global economy and markets took a few

punches in 2023 but remained broadly stable.
For 2024, our base case is soft landing in the US
and EU, consolidation in China, and a mild
recovery in ASEAN (2024 Outlook: Soft
landing?). In this note, we discuss the ASEAN-6
country outlook for the year ahead, covering
growth, inflation, policy, and political dynamics.

The region has long attracted foreign inflows,

but two push factors have accelerated that
move since 2017 - de-risking since the onset of
US-China tensions, and next, supply chain
reconfigurations brought about by the
pandemic. While the region might be unable to ASEAN-6’s goods exports, especially
absorb or replace all the displaced production electronics, are poised to recover modestly in
capacity from China, ASEAN-6 countries offer 2024, after a challenging 2023. We expect
unique advantages, as we discussed in ASEAN- regional electronics shipments and
6: Tailwinds from supply chain reconfiguration. manufacturing activity to benefit from the
Singapore has been the key beneficiary in terms turnaround in global electronics sales, which is
of quantum of flows, followed by Vietnam and adjusting to the intense inventory destocking in
Indonesia. Electric vehicle components, 2023, amid favourable base effects.
electronics supply chain, and green
technologies are few of the key emerging
opportunities.

• Growth rebound, supported by bottoming

electronics cycle and recovering tourism

2024 should be a better year for ASEAN-6

growth. We see annual real GDP growth
recovering to 4.7% in 2024, up by 50bps from
2023’s deceleration to 4.2%. The growth uptick
will be driven by trade-oriented economies,
aided by a bottoming and fragile recovery in the
electronics cycle, with continued support from
travel and tourism.

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ASEAN-6 2024 Outlook: Cautious optimism
Malaysia, Singapore, Thailand, and Vietnam will
be the key beneficiaries, given their high trade
openness, and considerable electronics
exposure. Electronics exports for these four
economies have bottomed, and are recovering
at varying pace, with Vietnam leading the pack.
Concurrently, we expect ASEAN-6’s
international travel and tourism recovery to
continue in 2024, but with moderate reopening
tailwinds.
The region benefitted from the post-pandemic
normalisation in international travel and
tourism in 2023. Overall monthly foreign visitor
arrivals, while still below pre-pandemic levels,
have hit ~70-80% of 2019 numbers (except
Philippines) – see chart. The return of Chinese
travellers will remain key to ASEAN’s 2024
tourism advancement.
The return of Chinese visitors has lagged the
overall uptick, granted that China only re-
opened its borders at the start of 2023, with a
choppy growth recovery. Monthly Chinese
visitors to ASEAN-6 ranged between 17% to
50% of 2019 figures. We expect the relaxation
of visa requirements for Chinese arrivals, for
instance to Malaysia, Singapore, and Thailand,
coupled with increased flight capacity, to spur
Chinese visitors. We believe Thailand, which is
heavily reliant on foreign tourism, and
particularly China (accounting for ~30% of total
arrivals in 2019), will be the biggest beneficiary.
There are, nonetheless, risks on the horizon.
Our baseline view assumes a soft landing for
major global economies (US, EU), and a soft
rebound in China. Yet, the upturn will likely be
fragile. The global environment remains highly
uncertain and challenging, which could derail
ASEAN’s recuperation. Interest rates are high in
advanced economies, economic conditions are
bumpy in China, and lingering geopolitical
tensions could still disrupt supply chains. US-
China relations remain tense, while two wars
are ongoing. The diversion of cargo ships in the
Red Sea since December 2023 is also a reminder
of unexpected events that could hinder the
trade and manufacturing recovery.
Growth dynamics in domestic-oriented
economies, Indonesia, and Philippines, would
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ASEAN-6 2024 Outlook: Cautious optimism
be mixed in 2024. On one hand, we expect
steady Indonesian growth, amid supportive
consumption from election campaign spending
in early-2024, and subsequently supported by
an increase in minimum wages, higher
allocations towards social assistance and food
security programs in 2H24. On the other hand,
Philippines will stand out with slower 2024
expansion, dampened by the lagged impact of
high interest rates, following the most
aggressive monetary tightening cycle in the
region.
• Inflation contained and within targets
ASEAN-6’s inflation retreated over the course of
2023, and we expect headline inflation to be
contained and within targets for inflation
targeting economies, but with mixed
directionality in 2024.
Food and fuel, which together account for at
least 50-60% of consumer price inflation basket
(with food at a sizeable 20-40%), will be key to
1For Singapore, the 2024 inflation path is likely to be
bumpy, due to domestic dynamics from the hike in goods
regional inflation dynamics. The correction in
global food and energy prices is likely to temper
inflationary pressures, for instance in Indonesia,
Philippines, and Singapore1, barring unexpected
upside supply-side shocks to global commodity
prices.
Despite our expectations for contained global
commodity developments, we think Malaysia,
Thai, and Vietnam headline inflation will
average higher in 2024. Energy subsidies helped
to dampen inflation in 2023, but at a fiscal cost.
To reduce the fiscal burden, a shift to a targeted
approach in Malaysia (as signalled in Budget
2024), and potential unwinding of government
assistance in Thailand would lift domestic
energy prices, adding to headline pressures.
Vietnam’s headline inflation has bottomed out
since July 2023, and would average higher in
2024, in tandem with the demand pressures
arising from the growth recovery.
Exogenous shocks warrant attention during
geopolitical uncertainties and weather
and services tax, alongside other increases in carbon
taxes, public transportation fares, and water prices.
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ASEAN-6 2024 Outlook: Cautious optimism
disturbances. Ocean container and freight costs
have been inching up in the past fortnight as
carriers draw caution on transits through the
Red Sea. Any material passthrough to
commodity prices will impact the food and fuel
components. El Nino onset and food supply
curbs by key producing countries have kept few
prices of foodgrains (particularly rice) and
cereals elevated, hurting purchasing power.
• Limited urgency to front run the US Fed
Three factors will determine the ASEAN policy
direction in 2024 – domestic inflation, financial
stability, and global policy outlook. Proactive
monetary tightening that began in 2022 and
concluded in 2023 has helped to anchor
regional inflation expectations and contain
second-round effects from unexpected supply-
side shocks. Subject to exogenous shocks, the
lagged impact of the cumulative tightening is
likely to continue restraining core inflation
pressures and promote price stability within the
central banks’ inflation target ranges in 2024.
Consequently, real rates were back in positive
territory by end-2023, led by Indonesia and
Thailand.
The December US FOMC has injected some
uncertainty on the direction of the US Fed
policy in 2024, as markets have frontloaded
rate easing expectations. This has resulted in a
sharp correction in bond yields and the dollar,
providing relief to regional counterparts. That
said, ASEAN central banks will be wary of front
running the US Fed to preserve financial
(currency) stability and wariness over the
impact of external drivers on domestic inflation.
A case in point were the BSP and BI, who at their
recent rate reviews, maintained that there was
limited urgency to cut rates, while they monitor
evolving conditions. With our base case for the
US to cut rates in 2H24, we expect the ASEAN
counterparts to also consider loosening
monetary policy from July onwards, with the
easing cycle potentially spilling over into 2025.
In the interim, macroprudential measures
might be tapped to fine-tune liquidity and
credit conditions to take a pro-growth stance, if
the inflation outlook remains favourable.
• Political dynamics
Amongst the ASEAN-6 countries, Indonesia is
gearing up to hold its presidential elections in
February 2024, after a decade under President
Jokowi’s presidency. Post the registration
window, it is now finalised to be a three-
pronged race to the top seat. If any of the
candidates fail to receive more than 50% of the
nationwide vote and 20% of the provincial vote
in February, a run-off round will be held in June
2024. Subsequently, the new government will
assume office in late October, suggesting that
political developments will dominate market
direction and dynamics in 2024. Opinion polls
have Prabowo Subianto, the current Defense
Minister, who has teamed up with Gibran
Rakabuming Raka (mayor of Solo and son of
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ASEAN-6 2024 Outlook: Cautious optimism
incumbent President Jokowi), in the lead with
about 40% of the votes at the time of writing.
Gleaning from the recent presidential debates,
the Prabowo-Gibran camp highlighted the need
to pursue growth-oriented policies,
industrialise the mining and farm sectors to
absorb the working age population, supporting
the new capital agenda and emphasised on
green transition. The Ganjar-Mafud team
reinforced the 7% annual growth forecast,
broadly aligned with the outgoing government,
with a focus on raising growth by pursuing
down-streaming investment policies and being
supportive of infra projects under the National
Strategic Projects (PSN). The third candidate
Anies Baswedan has been more critical of the
ruling party’s policies, especially investments
into the metal & mining industry (prefers the
local enterprises to play a more dominant role)
and plans to review the indebted SOEs books.
Populist support measures like endowment
funds to provide scholarships, improving the
quality of schools in the provinces, improve
fertiliser distribution, more supply-side
measures to lower staple food costs, free
lunches, and milk at schools, etc. have been
promised.
Singapore’s leadership transition to the 4G
team is likely in 2024. Prime Minister Lee Hsien
Loong announced in November 2023 that he
will hand over to Deputy PM Lawrence Wong by
November 2024, if all goes well. The upcoming
handover would be ahead of the next general
election, which must be held by November
2025. We expect policy continuity. The 4G
leadership team is increasingly setting the
national agenda, for e.g., through the Forward
Singapore (Forward SG) exercise. The Forward
SG report released on October 27, provides a
new roadmap to chart Singapore’s future, and
build a ‘Vibrant, Inclusive, Fair, Thriving,
Resilient, and United Singapore’.
Incumbent governments in Philippines,
Malaysia, and Thailand are seeking to deliver
on their election promises, whilst maintaining a
pro-growth and stability bias. For instance, the
Thai ruling government, which took office in
August 2023, plans to stick with the ambitious
digital wallet scheme, which has attracted
scepticism, given its substantial fiscal cost and
administrative complexity. Malaysia’s Budget
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ASEAN-6 2024 Outlook: Cautious optimism

2024, tabled in October 2023, carried a shift In the next section, we present our economic
away from broad-based subsidies to a more outlook for each of the countries in ASEAN-6
targeted approach in welfare spending, (Indonesia, Malaysia, Philippines, Singapore,
accompanied by a 2% increase in the Sales & Thailand, and Vietnam).
Services Tax (SST) to 8%. We see limited scope
of political instability in the region, while
monitoring territorial disputes in the South
China Sea.

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ASEAN-6 2024 Outlook: Cautious optimism

Indonesia: A shift in the political leadership security programs are expected to support
2022 2023f 2024f 2025f consumption, just as inflation eases. Capex
GDP growth, yoy%, ave 5.3 5.0 5.0 5.2 projects were frontloaded in first three quarters
Inflation, yoy%, ave 4.2 3.7 2.8 2.5
Policy rate, %, eop 5.5 6.0 5.0 4.5 of 2023 to complete projects within the
IDR per USD, eop 15573 15400 15040 14680 outgoing President’s tenure, are likely to be
10-year yield, %, eop 7.10 6.70 6.30 6.20
accelerated further before the political
transition in Oct24. We expect growth to
Indonesia is gearing up to hold its presidential average 5% in 2024. A price correction in key
elections in February 2024, after a decade commodity groups i.e., palm oil, coal, iron ore
under President Jokowi’s presidency. Post the etc. had hurt exports performance in 2023,
registration window in Oct23, it is now finalised even as volumes held up. A concurrent slower
to be a three-pronged race to the top seat. If pickup in imports helped to keep the overall
any of the candidates fail to receive more than goods trade balance in surplus, but down 30%
50% of the nationwide vote and 20% of the in the corresponding period of 2022. With
provincial vote, a run-off round of poll will be global growth set to lose momentum in 2024,
held in Jun24. Subsequently, the new exports are likely to stay under a cloud, even as
government will assume office in late Oct24. pre-election slowdown in investments keeps
the overall trade balance in black, boding well
The country’s efforts to revitalise the for the current account and BOP dynamics.
manufacturing sector has found success in the
metals sector, for instance the significant nickel Inflation is expected to average within the
deposits has attracted ecosystem players to revised 1.5-3.5% target range in 2024, barring
build smelters as well as electric vehicle battery any energy shocks necessitating a relook of
producers, concurrent to the authorities’ push local fuel subsidies. Higher rice prices will
to expand the domestic EV market and require a strong supply side response, whilst BI
strengthen the infrastructure backbone. Iron & stays on hold in 1H24 before easing in the
steel exports along with coal has nearly doubled second half. A push to attract more rate-
in 2022 vs 2019 levels, making up 30% of total sensitive dollar flows via capital management
exports. Of note, exports of nickel (and articles measures are also likely to continue, to boost
thereof) have jumped more than six times and the reserves position.
ferro alloy nickel by 4x by Jan-Oct23 vs 2019,
boding well for overall value-added trade There is a growing debate on the timing of a
dynamics. start to the BI’s rate cutting cycle. We are in the
camp expecting a calibrated exit plan,
Average GDP growth in 1Q-3Q23 stood at 5.1% exhibiting a lower urgency to lower rates to
yoy, in line to meet our full year forecast at 5% preserve financial stability.
y/y. The upcoming 3-4% increase in minimum
Indonesia

wages, election campaign spending boost to For details, please refer to Indonesia 2024
consumption in early part of the year followed Outlook: Higher gear
by seasonal religious festivities, higher
allocations towards social assistance and food Radhika Rao
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ASEAN-6 2024 Outlook: Cautious optimism

Malaysia: Reforms on the cards fiscal weakness. Subsidies and social assistance
2022 2023F 2024F 2025F operating spending are budgeted to drop by
Growth, yoy% 8.7 4.0 4.8 4.8 ~18% YoY to MYR52.8bn in 2024. The
Inflation, yoy% 3.4 2.5 2.9 2.5
government will shift to targeted subsidies for
Policy rate, % eop 2.75 3.00 3.00 3.00
MYR per USD, eop 4.40 4.59 4.50 4.30 RON95 petrol in 2H24, despite the
10-year yield, % eop 3.68 3.73 3.65 3.50 government’s higher oil price assumption of
USD85/bbl in 2024, vs 2023’s USD80/bbl. Tax
Malaysia’s economy under Prime Minister
measures, including raising the Sales and
Anwar Ibrahim has faced tough global
Services Tax to 8% from 6%, have also been
conditions in the government’s first full year in
introduced to shore up revenues.
office in 2023. Yet, it is against the new post-
pandemic and cyclical challenges that the Headline inflation would likely average higher in
administration has set out a clearer economic 2024, after 2023’s moderation. We forecast
direction and ambitions under the ‘Madani headline inflation of 2.9% in 2024 - at the mid-
Economic Narrative (MEN)’ for the next 10 point of the Ministry of Finance’s wide 2.1%-
years (see Malaysia: Growth headwinds, 3.6% projection range. Back in Sep 2013, when
Madani focus). the prices of diesel and RON95 petrol were
raised by 10% each, energy and headline
Cyclically, we expect Malaysia’s growth to
inflation jumped to 4.8% YoY and 2.6% YoY,
recover modestly to 4.8% in 2024, after 2023’s
respectively, from 0.2% YoY and 1.9% YoY in
post-pandemic normalisation to 4.0%. This
Aug 2013. Inflation averaged at an elevated
would be close to the 5.0% pre-pandemic
3.0% rate in 4Q13.
growth trend. Much of 2024’s growth uptick
hinges on the pace of external recovery. The Bank Negara Malaysia (BNM) is likely to keep its
export-oriented manufacturing sector is set to overnight policy rate at 3.00% for a prolonged
recover, as the global electronics cycle period, in our view. BNM assessed its stance as
improves gradually, after 2023’s deep remaining ‘supportive of the economy’ during
downturn. Malaysia’s domestic demand its Nov 2023 decision, having reached its
growth, particularly private consumption and terminal rate in its final hike in May. We note
investment, will continue to be growth that BNM has historically kept its monetary
supportive in 2024, even though it has stance stable for long periods, after hitting a
normalised from 2022’s reopening highs in terminal level of ~3.00%-3.25%. A rate hike in
2023. Labour market conditions will remain 2024 is an upside risk, rather than our base case
resilient, and multi-year infrastructure projects at this juncture. Tightening would have to be
are likely to progress further. accompanied not only by higher inflation, but
also much stronger above-trend economic
In line with the MEN, fiscal reforms are on the
expansion.
cards in 2024, as signalled during mid-Oct
Malaysia

2023’s Budget 2024 announcement. Subsidies

Chua Han Teng
rationalisation, especially on fuel and
electricity, will be of attention to sustain
consolidation to tackle Malaysia’s long-standing

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ASEAN-6 2024 Outlook: Cautious optimism

output kept the PMI-manufacturing in

Philippines: Finding balance
expansionary terrain, but the passage of the
2022 2023f 2024f 2025f
GDP growth, yoy%, ave 7.6 5.8 5.3 5.4 ambitious infrastructure spending plan in 2016-
Inflation, yoy%, ave 5.8 6.0 3.3 3.0 2017 has since driven fixed investment plans
Policy rate, %, eop 5.5 6.5 5.5 5.0
PHP per USD, eop 55.6 55.3 54.2 53.0
lower post Covid. The tug-of-war between the
10-year yield, %, eop 6.97 6.60 5.90 5.35 need to reinvigorate growth whilst keeping
fiscal spending under a tight rein will dominate
Philippines undertook one of the most the policy quandary in 2024, as monetary policy
aggressive rate hike cycles to ward off inflation levers are unlikely to be loosened in a hurry.
risks last year. After correcting for six successive
months, headline inflation reaccelerated in Goods exports are down 7% yoy in first nine
Aug-Sept23, driven by the index-heavyweight months of 2023, with electronic shipments
rice and transport fare increases. This coincided (~56% of the total) weighed by slower global
with the peso coming under pressure from a uptake for consumer goods and inventory
hawkish US Fed, convincing the BSP to deliver a drawdown. A sharp 10% YTD fall in imports has
last hike in Oct23. This took cumulative hikes to helped to narrow the trade deficit by a third in
450bps to 6.5%. Core inflation has meanwhile Jan-Sep23 and limit the extent of drag on
remained benign, addressing worries over a headline growth. With signs of bottoming out in
generalisation in price pressures. From average regional electronics exports, we expect the
6% in 2023, headline inflation is likely to slow to slowdown in Philippines’ exports to also ease
3.3% in 2024, allowing the BSP to reverse part up. But a sharp recovery will be hampered by
of the tightening in the second half. Key risks to slower growth outlook for the US, Europe, and
our call stem from supply-side shocks especially China. We revise down our 2023 growth
in food and energy prices. forecast to 5.8% and expect an uncertain global
environment and lagged impact of high rates to
Household consumption held relatively well keep 2024 growth at 5.3% yoy.
this year, up 5.7% yoy in 1Q-3Q, returning to
pre-2020 annual pace. Besides higher savings, Overseas remittances continue to be a resilient
unemployment rate stayed low besides source of support for the current account math
improvement in the participation rates. Despite (CA), with Jan-Jun23 remittance inflows at
a broad slowdown in bank lending growth, $13.6bn vs $13.2bn same time last year. A
advances towards consumer loans rose 23.5% narrower goods & services trade deficit, steady
yoy, upheld by unsecured and vehicle loans, remittances will keep the CAD around -3.3% of
with households making up ~11% of total loan GDP vs -3.9% last year. This compares to BSP’s
disbursements by big banks as of Sep23. projections of -2.5% of GDP for 2023 and -2.1%
for 2024.
Elevated borrowing costs, however, took a bite
Philippines

on the ex-consumer loans, as overall bank Radhika Rao

credit growth rose by the slowest pace in two
years in Sep23, led by the manufacturing and
real estate sectors. Stronger factory orders and

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ASEAN-6 2024 Outlook: Cautious optimism
Singapore: A year of renewal
2022 2023F 2024F 2025F
Growth, yoy% 3.6 1.2 2.2 2.5
Inflation, yoy% 6.1 4.7 3.5 2.4
SGD per USD, eop 1.34 1.32 1.32 1.31
10-year yield, %, eop 3.09 2.71 2.70 2.70
2024 will likely be a year of renewal for
Singapore’s economy. We expect better
economic growth and bumpy inflation
moderation, barring large shocks from lingering
global uncertainties. 2024 will also be an
important year of leadership transition to the
4G leaders, with expected policy continuity.
Singapore’s growth prospects are set to
improve in 2024, mainly supported by a
gradual yet fragile external-led recovery. We
forecast 2024 real GDP growth to rise to 2.2%,
from 2023’s subdued advance estimate of 1.2%.
2H23’s uptick to 1.9% YoY, 1.5% QoQ sa average
reflected signs of an emerging recovery after
1H23’s narrow shave from technical recession.
Manufacturing, which has been weak for most
of 2023, is showing early signs of a turnaround,
and we expect modest expansion in 2024, as
external demand gradually recovers.
Manufacturing’s uptick will spill over positively
onto trade-related services. Financial services
also look set to turn up gently, with global
interest rates peaking, alongside more
supportive base effects. Travel services will
continue to benefit from the complete recovery
in inbound tourism, but with tapered growth.
Inflation is likely to be bumpy, but average
lower in 2024 vs 2023. We forecast average
2024 headline inflation and core inflation of
3.5% and 3.1%, respectively, vs 2023’s 4.7% and
4.0%. This will remain above the respective pre-
pandemic 2010-2019 averages of 1.7% and
1.5%. In the immediate horizon, we see
domestic inflationary impulses that will lift core
inflation temporarily. The goods and services
tax (GST) has been hiked to 9% from 8% starting
Jan 2024, while carbon taxes, and public
transport fares were also raised. Water prices
are also scheduled to be increased.
Nevertheless, core inflation is likely contained,
and will eventually resume its easing path, in
line with global trends and moderating
domestic wage pressures. Cooling core
inflation, easing private transport inflation, and
contained accommodation price increases are
likely to dampen headline inflation.
Singapore’s leadership transition to the 4G
team will likely take place in 2024, and we
expect policy continuity. Prime Minister (PM)
Lee Hsien Loong said in his Nov 5 speech that he
will hand over to Deputy PM Lawrence Wong by
Nov 2024, if all goes well. He added that Deputy
PM Wong and the 4G team ‘have taken on
greater responsibilities, and they are preparing
well to take the helm’. They are increasingly
setting the national agenda, for e.g. through the
Forward Singapore exercise. Led by the 4G
leaders, the Forward Singapore report released
on October 27 2023, provides a new roadmap
to chart Singapore’s future, and build a ‘Vibrant,
Inclusive, Fair, Thriving, Resilient, and United
Singapore’ (see Forward Singapore: A roadmap
towards resilience for our key takeaways).
On policies, fiscal policy is likely to balance near-
term issues and long-term priorities from
Forward Singapore, with room for slight
expansionary stance. Monetary policy returns
to quarterly decisions amid uncertainty. After
maintaining tight SGD NEER policy in 2023, a
Singapore
potential reduced slope in July 2024 would align
with cooler inflation and the global cycle.
Chua Han Teng
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ASEAN-6 2024 Outlook: Cautious optimism

Thailand: New government, policy challenges in. The financing of the THB500bn digital wallet
2022 2023F 2024F 2025F policy via special loans borrowing faces criticism
Growth, yoy% 2.6 2.3 3.3 3.0 and uncertainties regarding its legality and
Inflation, yoy% 6.1 1.3 1.7 2.0
support. However, if implemented, household
Policy rate, % eop 1.25 2.50 2.50 2.50
THB per USD, eop 34.6 34.3 33.6 32.5 spending would be lifted for the six months
10-year yield, % eop 2.64 2.68 3.10 2.90 starting May 2024. If the digital wallet scheme
does not go through, we will be watching for
Thailand enters 2024 with a new Pheu Thai
new stimulus plans and accompanying fiscal
Party-led coalition government that is made up
risks, given the government’s desire to support
of 11 parties. Political uncertainty has been
growth, despite diminished fiscal space.
reduced after the government’s formation,
albeit three months after May 2023’s general We expect higher average inflation of 1.7% in
elections. Even so, we reckon that 2024, in tandem with improved growth, higher
policymaking is unlikely to be entirely smooth minimum wages, and lower subsidies. It would
over the coming years, given the likelihood of be within the Bank of Thailand (BOT)’s 1-3%
diverse views. The administration’s immediate headline inflation target. 2024’s headline
priority is to sustain the post-pandemic inflation would contrast with 2023’s broad-
economic recovery. Policies aimed at raising based easing, due to 2022’s high base, lower
annual growth to 5% over the next four years energy prices, government subsidies, and the
are with good intention, but proposed populist BOT’s monetary tightening.
initiatives are coming under scrutiny, amid
diminished fiscal space. The BOT has normalised its benchmark interest
rate to 2.50%, the highest in a decade, after
Thai growth is set to pick up into 2024, with tightening by a total of 200bps since August
our baseline forecast at 3.3%, after the 2022. We expect the BOT to maintain its
lacklustre performance in the first 3Q of 2023. benchmark rate at 2.50% in 2024, as it deems
We expect goods exports to turn around to current policy settings as ‘appropriate’ for
modest expansion in 2024, as the global supporting long-term sustainable growth. Yet, it
electronics cycle recovers from a deep will retain the flexibility to shift, should the
downturn. Foreign tourism is likely to continue evolving outlook changes.
its steady recovery to >30mn arrivals, towards
the pre-pandemic 2019 levels of ~40mn. Thailand’s overall 2024 outlook remains highly
Further impetus is still required from returning uncertain, and could deviate from our current
Chinese tourists, Thailand’s biggest source of baseline view. On the upside, implementation
inbound visitors pre-pandemic. Flight capacity of government stimulus could spur domestic
should continue to recover, alongside appetite demand. On the downside, the export recovery
to travel to the kingdom. could be delayed by weaker-than-expected
global growth.
Thailand

Private consumption, which expanded robustly

in 2023, will remain growth supportive in 2024, Chua Han Teng
but with notable upside risks from the proposed
digital wallet scheme that we have not factored

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ASEAN-6 2024 Outlook: Cautious optimism
Vietnam: Cyclical upturn, strong FDI prospects
2022 2023 2024F 2025F
Growth, yoy% 8.0 5.0 6.0 6.8
Inflation, yoy% 3.2 3.3 3.5 3.5
Policy rate, % eop 6.00 4.50 4.50 4.50
VND per USD, eop 23633 24269 23800 23400
Vietnam’s gradual growth recovery is likely to
extend into 2024, after embarking on this path
in 2H23 from a weak 1H23. We forecast growth
to rise to 6.0% in 2024, from 2023’s muted 5.0%
- below the 7.3% average from 2017-2019.
We expect 2024’s recovery to be mainly driven
by an uptick in export-oriented manufacturing
activity. Notably, electronics exports, the
largest goods exports product at ~30% of total,
are likely to return to expansion for full-year
2024, after a weak 2023. Vietnam’s monthly
electronics shipments have returned to growth
since September 2023. They are likely to
improve further, alongside the global
electronics cycle, with inventory destocking
largely completed in 2023, alongside favourable
base effects.
Against a tough and uncertain cyclical
landscape, we are encouraged that Vietnam
has maintained its leading position as a foreign
direct investment (FDI) darling in the region.
Newly registered FDI picked up strongly in full-
year 2023, close to the highs seen in 2017,
spurred by manufacturing interest. Vietnam is
likely to remain attractive over the coming
years, and we expect companies to diversify
and de-risk their supply chains by expanding
into the country. Key advantages include
competitive wage costs, wide network of trade
agreements, supportive business environment,
expanding manufacturing ecosystem, and
efforts to upgrade infrastructure (see ASEAN-6:
Tailwinds from supply chain reconfiguration).
In improving lagging infrastructure, public
investment has been supportive over the
course of 2023. We expect public infrastructure
to continue to gain traction in 2024.
Policymakers are likely to strive to hit its 2024
growth target of 6.0-6.5%, with the 2021-2025
five-year plan average growth target of 6.5-
7.0% also in their considerations. Growth has
disappointed in recent years, and there is fiscal
room to shore up growth.
Monetary policy, which has been proactive to
shifting macroeconomic conditions, is likely to
remain on status quo and be growth supportive
in 2024. After reducing its main policy interest
rates by a total of 150-200bps in 1H23, the State
Bank of Vietnam (SBV) has been more cautious
in further easing amid depreciatory currency
pressures. While headline inflation appears to
be bottoming out since July 2023, it is likely to
stay contained within policymakers’ 4.0-4.5%
target in 2024. Considering still subdued credit
growth and the nascent growth recovery, we
think that the SBV would be in no hurry to
normalise interest rates higher.
Risks to our Vietnam’s 2024 outlook are to the
downside. First, the recovery hinges on external
demand dynamics, given its high trade
openness. Notably, the US accounts for ~30% of
Vietnam’s overall goods exports. An
unexpected US recession could derail Vietnam’s
recovery prospects. Second, bigger property
market strains could have larger negative spill-
Korea
overs on the banking sector, which has weak
Singapore
Thailand
Vietnam
Taiwan
capital adequacy.
South
Chua Han Teng
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ASEAN-6 2024 Outlook: Cautious optimism

Group Research
Economics & Strategy

Taimur BAIG, Ph.D.

Chief Economist
Global
taimurbaig@dbs.com

Wei Liang CHANG Tracy Li Jun Lim Amanda SEAH

FX & Credit Strategist Credit Analyst Credit Analyst
Global USD Credit SGD Credit
weiliangchang@dbs.com tracylimt@dbs.com amandaseah@dbs.com

Nathan CHOW Eugene LEOW Daisy SHARMA

Senior Economist Senior Rates Strategist Analyst
China/HK SAR G3 & Asia Data Analytics
nathanchow@dbs.com eugeneleow@dbs.com daisy@dbs.com

Han Teng CHUA, CFA Teng Chong LIM Joel SIEW, CFA
Economist Credit Analyst Credit Analyst
Asean SGD Credit SGD Credit
hantengchua@dbs.com tengchonglim@dbs.com joelsiew@dbs.com

Mo JI, Ph.D. Tieying MA, CFA Mervyn TEO

Chief Economist Senior Economist Credit Strategist
China/HK SAR Japan, South Korea, Taiwan USD Credit
mojim@dbs.com matieying@dbs.com mervynteo@dbs.com

Byron Lam Radhika RAO Samuel TSE

Economist Senior Economist Economist
Hong Kong Eurozone, India, Indonesia China/HK SAR
byronlamfc@dbs.com radhikarao@dbs.com samueltse@dbs.com

Violet LEE Philip WEE

Associate Senior FX Strategist
Publications Global
violetleeyh@dbs.com philipwee@dbs.com

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ASEAN-6 2024 Outlook: Cautious optimism

Sources: Data for all charts and tables are from CEIC, Bloomberg and DBS Group Research (forecasts and
transformations)

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