Peter Lundgreen

In July 2023, the Malaysian government drafted its “Ekonomi Madani” reforms that would hopefully restore the country’s high economic growth momentum. Earlier in 2022, Malaysia was declared one of the top developing countries in Southeast Asia for foreign investment due to three factors: robust economic performance, highly qualified workforce, and strong integration with the global economy. Looking back at the health crisis in 2020, there is no doubt that the ASEAN region experienced a significant decline in foreign direct investments (FDI). At the time, it could also be said that Malaysia experienced the worst FDI decline since 2009, however, the rebound was quick as the country tallied a record-breaking net inflow of USD 20.25 billion in 2021.

All eyes are on the Thai economy as it struggles to restore a robust growth momentum after the pandemic. Thailand’s 2023 performance is below its average expansion of 3.64 per cent between 2010-2019 and is far from returning to the above 7 per cent growth trend seen in the previous decade, with record-high interest rates and elevated household debt restricting growth prospects. Weak external demand also dampened Thai exports. A new dawn has come for Thailand as its new Prime Minister Srettha Thavisin seeks to boost the domestic economy through direct cash transfers to its citizens. Thavisin is also exerting indirect pressure on the Bank of Thailand (BOT) to roll back interest rate hikes introduced since 2022 to rein inflation in, but it will likely come at a huge cost.

Southeast Asian economies face kinder but ever-challenging times ahead in their quest to retain their title as global growth leaders. There’s a Chinese proverb that says “The higher you grow, the deeper you bow.” In this case, to sustain the momentum, countries in the subregion have to weather elevated inflation (particularly for food), high interest rates, and weak external demand amid China’s slowdown. Local currencies depreciated and stock markets slid for most of 2023, moving in step with global counterparts against the more competitive US dollar. Still, developing Asian economies remain promising spots for investment.