The economic landscape of Southeast Asia may undergo a reshuffle in 2026.
Recent data from the General Statistics Office of Vietnam shows that despite global trade turmoil, Vietnam’s economy still achieved breakthrough growth in 2025, with a GDP growth rate of 8.02%, ranking among the fastest-growing economies in Southeast Asia.
Vietnam’s ambitions don’t stop there. The Vietnamese government plans to achieve a GDP growth rate of 10% this year. If achieved, its GDP will exceed US$500 billion, surpassing Thailand to become the third largest economy in Southeast Asia after Indonesia and Singapore.
In contrast, Thailand’s economic growth in 2025 is relatively weak, hampered by political instability and high debt. Thailand has not yet released its latest GDP data, but the OECD predicts its GDP growth rate in 2025 will be around 2%.
Furthermore, some Singaporean media outlets have stated that if Vietnam maintains its high growth rate, it may surpass Singapore to become the second largest economy in Southeast Asia by 2029.
How will the Southeast Asian economic landscape change by then?
Thailand’s economy faces pressure.
Vietnam’s economic growth is particularly impressive in 2025.
The manufacturing sector’s contribution is especially prominent. In July 2025, the US and Vietnam reached a trade agreement, significantly reducing the benchmark tariff on Vietnamese goods imported into the US from 46% to 20%. This tariff rate is lower than that of competitors like India, greatly boosting the production enthusiasm of manufacturing enterprises and further stimulating Vietnamese exports.
This “front-loading” effect provided strong momentum for Vietnam’s economy. The General Statistics Office of Vietnam stated that in 2025, Vietnam’s total import and export volume exceeded US$900 billion for the first time, setting a new record.
In addition, large-scale infrastructure investment promoted by the government throughout the country also provided important support for Vietnam’s economic growth.
Official Vietnamese data shows that Vietnam’s GDP growth rate reached 8.02% in 2025, significantly exceeding initial expectations, making it one of the most dynamic economies in the region.
In contrast, Thailand’s prospects for 2025 are not so smooth.
Politically, Thailand is affected by domestic political turmoil and the border conflict with Cambodia. Economically, the slow recovery of the tourism industry, rising household debt suppressing domestic consumption, and the pressure on Thailand’s manufacturing sector from the Trump administration’s tariff policies have all contributed to the slowdown in economic growth.
Thailand has not yet released its fourth-quarter GDP for 2025, but a report released on January 5 by the Monetary Policy Committee of the Bank of Thailand predicts that Thailand’s economic growth will reach 2.2% in 2025. This figure is far lower than the at least 3% predicted by the Office of Fiscal Policy at the beginning of 2025.
As a former manufacturing hub in Southeast Asia, especially in the automotive sector, Thailand was once hailed as the “Detroit of Southeast Asia.” However, just like the crisis experienced by Detroit, more and more foreign companies are reassessing their strategies in Thailand. Suzuki Motor Corporation has already ceased production in Thailand by 2025, and Honda has also reduced production.
Yuthasak Supasorn, Chairman of the Board of Directors of the Industrial Zones Authority of Thailand, pointed out that high costs, low productivity, and slow pace of corporate modernization are causing Thailand to lose its advantages.
And one of the main pillars of the Thai economy—tourism—is no longer reliable. The number of foreign tourists visiting Thailand is expected to slow in 2025, impacted by domestic political instability, the Thai-Cambodian border dispute, and competition from neighboring countries’ tourism industries.
Thailand’s Ministry of Tourism and Sports released a report on the 5th stating that Thailand received 32.9 million foreign tourists in 2025, a 7.23% decrease compared to 2024. Foreign tourists brought in 1.53 trillion baht in tourism revenue, a 4.71% year-on-year decrease.
Looking ahead to 2026, Vietnam has set a 10% growth target. According to the Global Times, citing foreign media reports, if economic growth accelerates as planned, Vietnam’s nominal GDP is expected to reach $500 billion in 2026 or 2027, surpassing Thailand, and its per capita GDP will also exceed $5,000, gradually approaching the level of Indonesia, Southeast Asia’s largest economy.
However, the International Monetary Fund (IMF) points out that the full impact of trade protectionist trends may become more pronounced in 2026, posing a certain obstacle to Vietnam’s growth.
As for Thailand, its economy may remain under pressure in 2026. The Thai Ministry of Commerce stated that Thailand’s export growth may slow significantly this year, or even contract. The OECD predicts that Thailand’s real GDP growth in 2026 will be only 1.5%, a decrease of 0.5 percentage points from 2025.
The Bank of Thailand also predicts that Thailand’s economic growth will remain below its potential level for a long period, with GDP growth of approximately 1.5% in 2026, rebounding to 2.3% in 2027, still lagging behind other Southeast Asian countries. After a significant increase in exports in 2025 due to the “front-load” effect, export growth is expected to slow significantly to 0.6% in 2026.
Indonesia Remains Southeast Asia’s Leading Economy
As the largest economy in Southeast Asia and the fourth most populous country in the world, Indonesia’s total economic output has long held the top position in Southeast Asia.
Currently, the Indonesian Central Statistics Agency (BPS) has not officially released its 2025 GDP growth rate, but multiple institutions predict that Indonesia’s economic growth rate in 2025 will be 5.12%, slightly lower than the national budget target of 5.2% for 2025.
Indonesia believes its economic growth rate remains stable, not too low in Southeast Asia, comparable to neighboring Malaysia, Singapore, and Thailand, but lagging behind the high-growth Vietnam.
In Indonesia, manufacturing is one of the main drivers of economic growth. Unlike other major manufacturing countries with export-oriented development models, Indonesian manufacturing is primarily driven by high domestic demand. Strong domestic consumption resulting from its large population provides strong support for manufacturing growth.
In 2025, Indonesia’s manufacturing sector maintained a strong expansionary trend, driven by domestic demand, increased new orders, and employment growth, with the Purchasing Managers’ Index (PMI) consistently above the 50-point threshold.
Indonesian Finance Minister Purbaya believes that Indonesia’s economic growth is showing an increasingly positive trend, calling it a positive signal indicating a strengthening of the country’s economic fundamentals. “It’s clear that the momentum of economic reversal has arrived, so we should see even better growth in the future.”
The Indonesian central bank also predicts that, driven by a rebound in consumption and investment, Indonesia’s GDP growth rate will reach 5.3% in 2026.
In contrast, Singapore, currently the second-largest economy in Southeast Asia, finds itself in an awkward position, neither here nor there.
On January 2nd, Singapore’s Ministry of Trade and Industry released preliminary estimates indicating that, supported by manufacturing growth, Singapore’s economy is projected to grow by 4.8% year-on-year in 2025. Simultaneous expansion in biopharmaceutical manufacturing and the electronics industry is key to Singapore’s accelerated economic growth, with the technology sector particularly benefiting from rising global demand for AI-related products, driving export growth in semiconductors, servers, and related products.
The Ministry of Trade and Industry expects this growth momentum to continue into early 2026, but economists warn that economic activity may cool in 2026 as manufacturing growth normalizes and external risks resurface.
OCBC Bank’s Chief Economist, Serena Williams, stated that Singapore’s economic outlook remains largely influenced by external factors, including the uncertainty surrounding the Trump administration’s tariffs, US-China relations, and broader geopolitical risks.
Singapore’s Prime Minister, Lawrence Wong, acknowledged that Singapore’s 4.8% growth in 2025 exceeded expectations, but maintaining this growth rate will become increasingly difficult against the backdrop of escalating global economic changes.
DBS Bank economist Irwin Sear previously predicted that if Vietnam maintains its rapid growth while Singapore sustains its current growth rate, Vietnam’s economy will surpass Singapore’s by 2029.
At that time, the Southeast Asian economic landscape will undergo another major reshuffle.