Southeast Asia beacon of growth

The region is benefiting from a restructuring of global supply chains as it sits at the intersection of two of the world's largest free trade agreements

By Tommaso Magrini

A year and a half after the start of a historic interest rate hike cycle, Southeast Asia's economic outlook continues to stand out in a world of high inflation and weak demand. This is highlighted in an editorial published in Nikkei Asia, which points out that HSBC expects the six largest economies in Southeast Asia -- Indonesia, Thailand, Malaysia, the Philippines, Singapore and Vietnam -- to grow by 4.2 percent this year and 4.8 percent next year. This pace would far exceed the 1.1 percent expansion projected for the developed world in 2022 or the 0.7 percent estimated for next year. This acceleration is all the more remarkable considering that Chinese tourism dollar inflows have not returned to Southeast Asia as expected. A recovery in tourism would certainly be a boon for Southeast Asia. But in the meantime, trade, energy transition and digital transformation are set to fuel the region's economic growth for decades to come and ensure that this dynamic region remains a global growth engine. Southeast Asia has come a long way as a manufacturing hub. It now accounts for 8 percent of global exports and has overtaken the European Union as China's largest trading partner since 2020. The region is benefiting from a restructuring of global supply chains as it sits at the intersection of two of the world's largest free trade agreements, the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership. The RCEP in particular, with its business-friendly tariff reductions and rules of origin, is increasing Southeast Asia's attractiveness as a manufacturing base, a fact that more and more companies are recognizing. According to a recent HSBC survey, Asia-Pacific companies plan to base 24.4 percent of their supply chains in Southeast Asia in the next one to two years, up from 21.4 percent in 2020.