Economic growth across Southeast Asia is showing signs of divergence, with technology and export-oriented nations gaining momentum while others face headwinds from weaker domestic demand, according to a September 2026 quarterly review by McKinsey & Company.
The report notes 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. The outlook for the remainder of the year remains contingent on currency stability, household spending, and the durability of global technology investments.
Vietnam and Malaysia reported accelerated growth 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 a 5.9 percent expansion, and Indonesia’s economy grew by 5.29 percent.
Conversely, growth slowed in Thailand and the Philippines. Thailand’s growth declined to 1.9 percent from 2.8 percent in the previous quarter, and the Philippines recorded 2.3 percent growth, its slowest pace since 2021.
Exports, particularly in the electronics and electrical sectors, remained a primary driver of economic activity across the six countries analyzed. Singapore saw manufacturing growth accelerate to 12.5 percent, bolstered by demand linked to artificial intelligence, with non-oil domestic exports rising 27.4 percent. Malaysia reported a 42.4 percent increase in exports, while Vietnam’s exports grew by 22.7 percent, driven by electronics, machinery, and mobile phones.
Inflationary pressures were noted across most of the region, with five of the six surveyed economies experiencing an acceleration in price growth. The Philippines recorded an average inflation rate of 6.8 percent in the second quarter, while Vietnam’s inflation reached 5.25 percent. Indonesia was identified as an exception, where improved domestic supply conditions and lower food prices contributed to easing inflation.
Monetary and policy responses have varied. Indonesia and the Philippines have tightened monetary policy, and Singapore has tightened its exchange-rate policy. Malaysia, Thailand, and Vietnam have maintained their existing policy settings.
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