Southeast Asia growth picture diverges as Vietnam, Malaysia gain momentum: McKinsey

Economic growth across Southeast Asia is showing signs of increasing divergence, according to a September 2026 quarterly review by McKinsey & Company. The report highlights that technology and export-driven economies are gaining momentum, while weaker domestic demand is hindering growth in other parts of the region.

According to the report, the second quarter left the region with a differentiated growth outlook. While a robust external technology cycle continues to provide momentum, rising energy costs are testing the ability of individual economies to translate these gains into broader domestic growth. The report notes that future economic performance will depend on inflation, currency pressures, and household spending.

Vietnam and Malaysia saw significant growth acceleration in the second quarter. Vietnam’s economy grew by 8.39 percent year-on-year, up from 7.8 percent in the first quarter, while Malaysia’s growth rose to 6 percent from 5.4 percent. Singapore recorded 5.9 percent growth, and Indonesia’s economy expanded by 5.29 percent.

Conversely, growth in Thailand slowed to 1.9 percent from 2.8 percent in the previous quarter. The Philippines experienced a growth rate of 2.3 percent, marking its slowest pace since 2021.

Exports remained a primary driver of strength across the six economies analyzed: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Strong demand for technology supported electronics and electrical exports, with manufacturing activity improving in Malaysia, the Philippines, Singapore, and Vietnam. Singapore, in particular, benefited from artificial intelligence-related demand, with manufacturing growth reaching 12.5 percent and non-oil domestic exports surging by 27.4 percent.

Export growth was also notable in Malaysia, which saw a 42.4 percent increase, and Vietnam, which recorded a 22.7 percent rise driven by electronics, machinery, and mobile phones.

Rising energy costs have contributed to inflationary pressures, with inflation accelerating in five of the six surveyed economies. The Philippines reported average inflation of 6.8 percent, while Vietnam’s inflation reached 5.25 percent. Indonesia was identified as an exception, where easing food prices and improved supply conditions helped lower inflation.

Policy responses to these economic conditions have varied. Indonesia and the Philippines tightened monetary policy, and Singapore adjusted its exchange-rate policy. Malaysia, Thailand, and Vietnam maintained their existing policy settings. McKinsey concluded that while technology-led exports and manufacturing provide a strong foundation for the second half of the year, the sustainability of this growth remains subject to global technology investment cycles and domestic economic pressures.

Article source: vietnamtribune.com | Image credit: Yahoo News Singapore