Southeast Asian economies are becoming dynamic again

The Southeast Asian economies underwent a massive contraction in the wake of the Covid-19 pandemic due to nationwide lockdowns and border closures. The entire economic structure was on the verge of collapse with production activities being completely halted. However, after two years of the pandemic, the economies of Southeast Asia are on a path of recovery and are set to be vibrant and dynamic again.

Several factors are responsible for facilitating this fast-paced recovery. There has been an expansion in agricultural production in the small economies of the region. Tourism which has been a major contributor to the growth of many countries in the region also saw a rebound. The resilience shown by the merchandise export sector is adding to this economic recovery. Other supporting factors like remittance inflows, facilitative government fiscal and monetary policies, digital readiness of the Southeast Asian economies and concentrated value chains, have helped in shaping the fast-paced recovery of Southeast Asian economies in 2022.

Among the Southeast Asian economies, the Indonesian economy has shown resilience and is on the path of economic recovery. After contracting in 2020 and 2021, the Gross Domestic Product (GDP) growth has been projected to reach 5.2% and 5.1% in 2022 and 2023, respectively. The 2022 budget with the increased fiscal stimulus is expected to spur the domestic demand. Easing travel restrictions will also give a boost to the tourism sector. Proper containment of coronavirus infections and steady progress in vaccination drives have aided Indonesia's economic growth; and with an increase in labour productivity along with a halt in the unemployment rate, the chances of sustaining the productivity are positive.

Malaysia has been successful in managing Covid-19 better than its peers due to its strong health care system. This has resulted in the growth of GDP due to higher labour-force participation and also an increase in productivity of labour, because of a healthier workforce. This showed that proper investments in health infrastructures can lessen economic burdens enhancing the economy’s growth prospects. The country is expected to expand at 6% and 5.5% in 2022 and 2023, respectively.

The Philippines is witnessing robust growth with a 7% expansion in 2022 and is likely to continue the pace in 2023 as well, with a 6.1% growth. Strong implementation of infrastructural investment projects along with cash remittances by Filipino workers overseas has helped in hastening the process of growth in the post-pandemic phase.

Thailand was severely affected by Covid-19 because of its tourism-dependent economy. With the Covid-19 induced travel restrictions easing, the country is on a path of economic recovery. The GDP is expected to grow by 3.8% in 2022, before boosting up to 4.4% by 2023. The government has provided continued fiscal stimulus in the last two years, it is expected to continue and boost the domestic demands. The policymakers have used the pandemic as a catalyst to bring a structural shift in the tourism sector by moving from a mass tourism approach to a ‘quality’ tourist strategy, thereby focusing on the ones with more spending power. Digitisation has also been a driver of growth in the tourism sector as it provides platforms and facilitates contactless services. With the transformation in health security, digitisation, infrastructure, and connectivity, Thailand is showcasing a strong economic recovery based on its strong and reviving tourism sector.

Among the Southeast Asian economies, Vietnam is growing the fastest in the post-pandemic world, with its GDP expected to expand by 6.5% in 2022 and then further boost up to 6.9% in 2023. Vietnam’s fast-paced digital transformation is responsible for its phenomenal recovery. Digitization has enabled the economy to not only show resilience but also grow at a much faster rate than the rest in the wake of Covid-19. 

Brunei's economy is also expected to grow at a rate of 3.5% in 2022, followed by an expansion of 3% in 2023, according to the Economic Outlook for Southeast Asia, China, and India 2022 report by OECD. The government policies aimed at changing their approach by looking outside of oil and gas sector activities should be beneficial for the economy in the post-Covid-19 recovery. 

Lao PDR’s economy is expected to grow at 4.6% in 2022 followed by a growth rate of 4.9% in 2023. This growth is backed by the strong performance of the export sector of the economy which is growing due to increased demand in the neighbouring countries. Digitisation has also acted as a catalyst for economic recovery. 

The Cambodian economy is expected to grow by 5.6% in 2022, followed by a 6.3% growth in 2023. High vaccination rates have enabled Cambodia to fast pace its economic recovery. The agricultural sector has been resilient to the impacts of Covid-19 and with infections declining, agriculture is expected to boost the economy with agricultural exports already showing rapid growth. Export of electrical parts, bicycles, and vehicle spare parts has been showing tremendous growth and is expected to boost the economic recovery further. Moreover, increasing domestic demand, coupled with increasing demand from neighbouring countries has paved the way for a fast-paced economic recovery in Cambodia. 

Expected to expand by 4% in 2022 and 3% in 2023, Singapore’s GDP is expected to get a boost with the country relaxing its travel restrictions as Covid-19 protocols are also getting relaxed. Easing of protocols and reopening of the borders are still broadly balanced approaches as the cases are in decline in the country. 

Myanmar is amidst a human rights catastrophe at present, as warned by the United Nations. This is because of the military coup which happened in February 2021 during the Covid-19 pandemic. The political unrest along with the pandemic instigated violence and instability in the country, resulting in rising poverty, food insecurity, and widespread violence. Both the pandemic and coup posed serious threats to the country’s economic stability, and are continuing to do so. The political unrest has derailed the economy and according to the Economic Outlook for Southeast Asia, China, and India 2022 report by OECD, before expanding to 3.3% in 2023, the GDP will decline by 0.3% in 2022. The depreciation of the domestic currency is also worsening the economic situation of the country. 

With the exception of Myanmar, the remaining countries of the Southeast Asian region are on the path of slow but steady growth, to soon becoming vibrant and dynamic economies. The reason behind it is that most countries are changing their approaches and perspectives to adapt to the new normal in the post-pandemic world. With a digitisation focused strategy for the growth of the tourism sector, the increased importance of health care and infrastructure, expansion of agricultural production, and increased focus on non-traditional sectors; the markets of the region are set to boom again as the countries adapt to the unconventional circumstances for survival and growth. In the near future, one can expect the Southeast Asian countries to be identified as among the economic powers of the post-pandemic world. 

(The article has been authored by the Ananya Raj Kakoti is an associate with Indian-Political Action Committee (I-PAC) and a scholar of international relations, Gunwant Singh is a scholar of international relations from Jawaharlal Nehru University.)