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Economic growth across Southeast Asia is showing signs of divergence, with technology and export-driven nations gaining momentum while others face headwinds from weaker domestic demand, according to a September 2026 quarterly review by McKinsey & Company.
The report highlights that while a robust global technology cycle is providing a tailwind for the region, rising energy costs and inflationary pressures are testing the ability of individual economies to sustain broader domestic growth. McKinsey noted that the region’s economic outlook for the remainder of the year will be contingent on inflation levels, currency fluctuations, and household spending.
Vietnam and Malaysia saw their growth rates accelerate 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 also reported strong growth of 5.9 percent, and Indonesia’s economy expanded by 5.29 percent.
Conversely, growth slowed in Thailand and the Philippines. Thailand’s growth rate declined to 1.9 percent from 2.8 percent in the previous quarter. The Philippines recorded growth of 2.3 percent, representing its slowest pace since 2021.
Exports remained a primary driver of economic activity across the six nations analyzed: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Strong demand for electronics and electrical goods bolstered manufacturing in several of these countries. Singapore, in particular, saw manufacturing growth accelerate to 12.5 percent, driven by demand linked to artificial intelligence, while its non-oil domestic exports surged by 27.4 percent.
Malaysia reported a 42.4 percent increase in exports, and Vietnam saw a 22.7 percent rise, supported by electronics, machinery, and mobile phone shipments.
Despite these gains, rising energy costs have contributed to increased inflation in five of the six countries studied. The Philippines recorded average inflation of 6.8 percent in the second quarter, while Vietnam’s inflation reached 5.25 percent. Indonesia was noted as an exception, where easing food prices and improved supply conditions helped lower inflation.
Governments have adopted varying policy responses to these economic conditions. Indonesia and the Philippines have tightened monetary policy, and Singapore has tightened its exchange-rate policy. Meanwhile, Malaysia, Thailand, and Vietnam have maintained their existing policy settings.
McKinsey concluded that while technology-led exports and manufacturing activity provide a foundation for growth in the second half of the year, the long-term sustainability of this momentum remains dependent on global technology investment cycles and domestic economic pressures.
Article source: www.singaporestar.com | Image credit: www.singaporestar.com
