Southeast Asia will sustain growth at close to 5% this year and next, according to a new Asian Development Bank (ADB) report.

The latest Asian Development Outlook (ADO) 2019, ADB’s flagship economic publication, forecasts strengthening domestic demand will offset weaker export growth. Strong consumption—spurred by rising incomes, subdued inflation, and robust remittances—should boost economic activity in Southeast Asia. Export demand, on the other hand, is likely to soften in 2019 in line with the weaker global environment and a muted forecast for semiconductor exports, before picking up slightly in 2020. 

Growth was marginally lower at 5.1% last year as strong domestic demand countered slowing exports. With weakening global growth, slowing trade, and softer commodity prices, export prospects dim further for the highly trade-engaged economies of Southeast Asia. Continued strength in domestic demand should nevertheless support growth at 4.9% this year and 5.0% next year. 

In half of the 10 economies in Southeast Asia, growth is forecast to slow in 2019. In the Greater Mekong Subregion, the forecast for the Lao People's Democratic Republic will be unchanged while Myanmar will post higher growth. Strong consumption, spurred by rising incomes, stable inflation, and robust remittances is underpinning growth in Thailand, as is foreign investment in Cambodia and Viet Nam. 

Inflation in Southeast Asia will dip marginally this year before returning to last year's 2.7%, broadly held in check by slowing growth and lower international oil prices, even as some countries hike administered prices.

This article is adapted from the Asian Development Outlook 2019.