The Southeast Asian economic growth is forecasted to hit 4-5% annually over the next 10 years, said Bain recently when releasing a report jointly produced with Monk’s Hill Angsana Council.
Vietnam is expected to lead the charge at a projected growth of 5-7%, the firm noted.
While many economists have correctly focused on the pro-growth policies, stable macroeconomics and healthy demographics of Southeast Asia, they often miss two critical sources of additional growth, according to the report titled “Southeast Asia’s Pursuit of the Emerging Markets Growth : How four factors could step up Southeast Asian growth”.
The two critical sources of additional growth are:
- The growing impact of tech-enabled entrepreneurs on investment, productivity and economic inclusion
- A growing Chinese economy
Contrary to conventional wisdom that diversifying away from China is the best for the Southeast Asian economic growth, the region benefits most from a growing Chinese economy, Bain pointed out.
Since 1991, the Southeast Asian economic growth has been strong and steady, Bain said, adding that per capita income in the region rose 2.5 times from US$1,900 to US$4,700 in 2020.
Contributing factors include stable government policies, surging entrepreneurial activity, favourable demographics, and a relatively benign international environment, the firm added.
Southeast Asia’s GDP per capita income, according to Bain, has been growing and could return to leading emerging markets growth on the back of the four factors below:
1. Robust traditional growth policies
2. A vibrant ecosystem of tech-enabled disruptors (TEDs)
3. Attractive demographics with a growing working and middle class
4. Taking a neutral stance amidst geopolitical winds
A modest economic uptick is expected for all major Southeast Asian countries except Thailand, which should be interpreted as a “rosy scenario” relative to the growth headwinds faced by Europe, Japan, China and emerging regions like Latin America and Eastern Europe, Bain noted .
Robust traditional growth policies
In addition, Southeast Asian countries have made steady progress towards improving several of the following seven traditional growth drivers defined in the study, Bain observed.
1. Improving the ease of doing business
2. Enabling healthy competition
3. Facilitating investment
4. Strengthening government and reducing corruption
5. Raising education levels and promoting re-skilling
6. Improving infrastructure
7. Increasing macroeconomic and social stability
The most noticeable improvement in Southeast is the marked increase in macroeconomic stability since the 1997 Asia Crisis, Bain said, adding that this reduction in risk will benefit Southeast Asia during this time of global headwinds.
Vibrant ecosystem of tech-enabled disruptors (TEDs)
Today, the greatest force of progress in most developing countries are tech-enabled disruptors or TEDs, Bain pointed out.
The TEDs are directly and indirectly impacting six of the seven traditional growth drivers by promoting business creation, enabling healthy competition, raising investment, strengthening e-government, improving education and productivity levels, and improving infrastructure, the firm added.
Pressure from TEDs is forcing traditional family-controlled or “national champions” to increase investment levels and accelerate innovation or face irrelevance in the coming decade, Bain observed.
Most Southeast Asian governments actively nurture the growth of TEDs with beneficial policies, regulations, and infrastructure building in areas critical to tech-enabled disruption, Bain added.
According to the firm, the full report analyses four sectors — aviation, finance, logistics, and super-apps — that highlight the disruptive impact of TEDs and how they will contribute to the Southeast Asian economic growth.
Demographics with a growing working and middle class
One advantage of region is the demographic dividend expected from the size and growth of its working-age population, which is driving the Southeast Asian economic growth, Bain said.
The region has the largest cohort of children relative to total population among the emerging regions under review, the firm observed.
Middle-class consumerism is expected to rise given a youthful population that needs to spend on lifestyle, education, housing, and other needs well into the 2030s, while Latin America and Eastern Europe’s populations will begin to contract, Bain predicted.
Southeast Asia has seen consumer growth in line with GDP growth at an attractive and sustainable rate, Bain said.