Singapore, Thailand may see negative growth by 2026 as Asean reels from tariffs: economists
Bloomberg Economics projected on Tuesday (Jun 17) that gross domestic product growth across the Asean-5 economies – Singapore, Malaysia, the Philippines, Vietnam and Indonesia – is expected to fall from 4.5 per cent in 2024 to 3 per cent in 2025.
The research unit added that growth could even fade to 1.5 per cent in 2026 if the tariffs stay in place.
Among the five, Thailand and Singapore are likely to be hit the hardest because of their exposure to global trade, said Bloomberg's senior economist for South-east Asia Tamara Henderson.
Thailand, the exports of which account for nearly 70 per cent of GDP, faces potential tariffs as high as 36 per cent. She warned that the country's growth is likely to slip below 2 per cent in 2025, and may contract outright in 2026 if the tariffs remain.
'Over 11 per cent of Thailand's GDP comes from merchandise exports to the US, particularly in electronics and chips,' she noted. 'Auto-supply chains are also affected, and tourism recovery has faltered.'
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Although Singapore faces the minimum 10 per cent baseline tariff, it is arguably the most exposed in the region because of its export-oriented economy.
About 6 per cent of its GDP depends on exports to the US, with significant trade in semiconductors and pharmaceuticals, for which the likelihood of additional duties remains unclear.
This could drag Singapore's 2025 growth sharply below the strong 4.4 per cent recorded in 2024. If the tariffs remain in force, Singapore's economy could contract by around 1 per cent in 2026, Henderson projected.
'Singapore is likely to take the largest hit to growth in the near-term from the tariff shock. However, its agile and well-resourced government may allow the city-state to emerge with less scarring over the medium term,' she added.
Economies such as the Philippines and Indonesia are expected to weather the tariff storm better, given that their growth is more led by domestic demand. In Indonesia, US-bound shipments account for only around 10 per cent of exports.
'Exports in Indonesia are about 25 per cent of overall GDP, compared to household spending, which makes up around 50 per cent,' said Henderson.
Likewise, the Philippines' tight labour market and strong household sector are likely to support domestic spending, shielding the country from heavy tariff shocks.
She noted, however, that the tariffs could hit both economies in areas beyond trade, given that weak global demand and weaker pricing power along supply chains could dampen the region's investment and hiring opportunities.
Balancing acts
Heavy US tariffs on South-east Asian economies mean that the region's attractiveness as an alternative 'China-plus-one' destination is slowly fading.
Asean countries must therefore find new opportunities to remain resilient, said Priyanka Kishore, lead economist at the policy consultancy Asia Decoded; she was speaking at the launch of a report on the region's economic outlook by the Institute of Chartered Accountants in England and Wales on Jun 12.
China's role in the changing global order will be difficult to navigate, she said, because its improvements in manufacturing could be damaging to the region's economies, even as it offers an alternative trade destination to the US.
She noted that the region's labour productivity has lagged at half the pace of China's in recent years. 'China is capital-intensive and mechanised; it is producing items at a fraction of the cost of that in a factory in Indonesia.
'Regional cooperation will have to include reform in infrastructure and human capital development, such as training of skills and digitalisation,' she said.
Henderson added that Asean's resilience will depend on identifying new competitive niches.
'Finding these gaps will be the challenge. Perhaps, these will be in services. Countries such as Singapore, with its many Mandarin speakers, could see an advantage in its ability to understand both the West and China,' she suggested.
But China's place in the Asean story is not entirely damaging, analysts say. The Chinese government's efforts to boost its ailing economy have been widespread, and aimed at making domestic demand the main engine and anchor of its economic growth.
If successful, a wealthier Chinese middle class could spark opportunities in trade and investment for certain sectors in the region.
Gary Tan, portfolio manager at Allspring Global Investments, said: 'These include tourism, logistics and e-commerce; regional hubs like Singapore could see increased cross-border activity.'
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