The Southeast Asian economy posted stronger-than-expected growth in the second quarter of 2025, driven by accelerated business activities during the 90-day tariff suspension period. Among ASEAN member states, Viet Nam emerged as the region’s fastest-growing economy, recording its highest growth rate in more than a decade.

Regional growth rebounds sharply

After a slow start in the first quarter, Southeast Asian economies regained momentum in Q2 2025. According to regional reports, businesses ramped up production and shipments to take advantage of the temporary suspension of tariffs, boosting trade and manufacturing activities. Viet Nam led the region with GDP growth of 8%, up from 6.9% in Q1, reflecting a broad-based recovery in both supply and demand.

Indonesia, the Philippines, and Singapore also recorded higher growth during the quarter, while Malaysia remained stable at 4.4% year-on-year. Thailand was an exception, with slower growth due to a decline in tourist arrivals and weaker domestic consumption.

Key growth drivers continued to strengthen across the region. Industrial activity rebounded unexpectedly thanks to stronger orders and exports, while private consumption remained a “steady pillar” supported by low inflation and resilient labor markets. However, investment showed mixed signals amid cautious business sentiment and a shift toward looser monetary policies.

Trade and Industry benefit from the tariff suspension window

Regional trade in Q2 2025 was significantly supported by a surge in exports during the tariff suspension period. Indonesia, Singapore, Thailand, and Viet Nam all reported double-digit export growth, driven by strong demand for garments, footwear, electronics, and machinery.

In Malaysia, export growth slowed due to lower commodity prices, though the electrical and electronics sector remained resilient. The Philippines saw exports rise by 4.4%, down from 7.1% in the previous quarter, but the semiconductor industry continued to perform strongly. Nonetheless, analysts cautioned that the current export boom may be temporary, as reciprocal tariffs are set to take effect on 7 August 2025.

The manufacturing sector also saw a notable recovery. Production activity in Indonesia, Singapore, Thailand, and Viet Nam accelerated, supported by robust domestic demand and the strength of key sectors such as electronics and biotechnology. The regional Purchasing Managers’ Index (PMI) improved significantly, with the Philippines, Singapore, Thailand, and Viet Nam all returning to expansion territory-indicating increased output, rising new orders, and an overall rebound in economic activity—by the end of Q2.

Domestic consumption remains the anchor of stable growth

Private consumption continued to be the main driver of regional growth, supported by a low-inflation environment and stable employment. Except for Thailand, where household spending weakened amid softer consumer confidence and slower tourism, other economies reported higher quarter-on-quarter increases in household expenditure. Favorable inflation and employment conditions are expected to sustain consumer demand through the second half of 2025.

Labor markets and prices stay stable

Labor markets across the region remained generally solid, with unemployment rates staying low. Malaysia recorded its highest-ever labor force participation rate, while Viet Nam experienced notable wage growth amid a tightening labor market. However, analysts warned that hiring could become more selective due to external uncertainties and ongoing supply chain restructuring.

Inflation remained well-contained in Q2 2025. Malaysia, the Philippines, and Singapore all reported slower consumer price increases, while Thailand experienced deflation for the first time in five quarters. Both the Philippines and Thailand maintained inflation below national targets, supported by stable global commodity prices and moderate domestic demand.

Financial markets strengthen amid looser monetary policies

Most Southeast Asian currencies appreciated in Q2 2025, aided by a weaker US dollar and greater clarity on tariff developments. The Singapore dollar, Malaysian ringgit, Philippine peso, and Thai baht all strengthened, while Indonesia’s rupiah fluctuated but ended the quarter up 2.8% against the US dollar. The Vietnamese dong (VND) slightly depreciated due to export pressures but is expected to recover as trade tensions ease.

Monetary policy across the region shifted toward easing. The Bangko Sentral ng Pilipinas cut interest rates three times from Q2 to August, while Indonesia, Thailand, and Malaysia also lowered rates. Singapore and Viet Nam held rates steady. These adjustments reflect efforts to support growth amid lingering global uncertainties.

Investment flows: Viet Nam and Thailand continue to attract capital

Investment commitments showed divergent trends across the region. Viet Nam and Thailand remained standout destinations for foreign investment, particularly in high-tech manufacturing, electronics, and data centers. Indonesia recorded its sharpest FDI decline since 2020, while Malaysia and the Philippines saw investment inflows slow amid rising regional competition and geopolitical uncertainty.

In Singapore, FDI remained stable, reaffirming its role as the region’s leading financial and technology hub, attracting projects in artificial intelligence, digitalization, and climate technology.

Outlook for the second half of 2025

Experts noted that the strong Q2 performance significantly improved economic outcomes for the first half of 2025. However, the region is expected to face growing challenges in the latter half of the year as the effects of the “pre-tariff rush” fade and new tariff measures begin to take hold.

Against this backdrop, ASEAN economies are expected to maintain flexible monetary policies, strengthen intra-regional trade, and diversify supply chains to sustain growth stability and enhance resilience against global uncertainties.

Source: Compiled by the Multilateral Trade Policy Department, Ministry of Industry and Trade of Viet Nam