Philippines to keep top spot in ASEAN 3 growth race

The Philippines, which likely posted the fastest economic growth among the 10 members of the ASEAN 3 bloc in 2023, is expected to retain that title this year.

The ASEAN 3 Macroeconomic Research Office (AMRO) estimated the Philippines' gross domestic product grew 5.6% last year, the highest in the region. AMRO lowered its 2023 growth forecast for the country to 5.6% from 5.9% and its 2024 outlook to 6.3% from 6.5%, but the revised figures would still make the Philippines the fastest-growing economy in the region.

The projected 2024 growth for the Philippines is predicted to outpace Cambodia's 6.2%, Vietnam's 6.0%, Indonesia's 5.2%, Malaysia's 5.0%, Laos' 4.7%, Myanmar's 3.2%, Thailand's 3.3%, Singapore's 2.6% and Brunei's 2.4%.

Meanwhile, China is forecast to grow 5.3% in 2024; Japan, 1.1%; and Korea, 2.3%.

AMRO also expects Philippine inflation to settle at 3.6% in 2024, down from 6.0% in 2023.

AMRO maintained its 2024 growth forecast of 4.5% for the ASEAN 3 region in its January quarterly update of the ASEAN 3 Regional Economic Outlook (AREO). Strong domestic demand amid moderating inflation and continued improvement in trade will propel growth, despite uncertainties surrounding the global outlook, AMRO said.

The ASEAN 3 region is forecast to end 2023 with a full-year growth of 4.4%, slightly higher than October's projection of 4.3%. The upward revision reflects the higher growth of 5.2% for China, up from last quarter's forecast of 5.0%.

Stabilizing industrial and services activities in the Chinese economy are helping to provide additional momentum to the region in 2024, alongside gradual improvement in exports to other key markets.

"The recovery in the global tech cycle is starting to be felt in the region's export performance, especially for electronics," said AMRO chief economist Hoe Ee Khor. "But non-tech exports are lagging behind in terms of recovery, which is why recent manufacturing sentiment surveys are relatively mixed."

Price pressures continue to recede across member economies, mirroring the trend in global commodity prices. Inflation in the ASEAN 3 region — excluding Laos and Myanmar — is forecast to moderate to 2.6% this year from an estimated 2.8% for 2023. However, upside risks to inflation remain salient, and core inflation continues to be high in many economies.

"Spiking global commodity prices remains the key risk to growth, but there are several other wildcards," Khor said. "We still cannot rule out a US recession, for one. The lead-up to the US election in late 2024 could also exacerbate policy uncertainty and volatility in financial markets."

AMRO estimates that a recession in the US and euro area this year could potentially slash the region's GDP growth by half. The negative impact on the region's growth would be amplified if the momentum in China's economic recovery weakens in tandem.

AMRO's mandate is to conduct macroeconomic surveillance, support regional financial arrangements, and provide technical assistance to its members. It also serves as a regional knowledge hub and provides support to ASEAN 3 financial cooperation.