Southeast Asian economies delivered mixed results in the third quarter of 2025 as front-loading effects waned and higher tariffs took hold. Vietnam demonstrated sound resilience, maintaining its position as the region’s top-performing economy, while Malaysia posted a notable growth uptick. Indonesia largely sustained its growth trajectory, and Singapore revised its 2025 growth projection upward despite a slight deceleration. In contrast, growth in the Philippines and Thailand slowed significantly as domestic challenges persisted, marking their weakest performances since 2021 (Exhibit 1).1
Core growth drivers showed signs of softening, in contrast to the broad-based strengthening seen in the second quarter. Industrial activity and private consumption moderated, with the latter softening despite stable labor markets. Exports were relatively resilient, buoyed by sustained global demand for electrical and electronics (E&E) products. The investment landscape was mixed, with investors more focused on pursuing higher potential and quality growth avenues. Policy stances across the region shifted in a largely dovish way, and the prevailing low inflation environment offered central banks further room to adopt accommodative measures to support economic activity in the near term.
The region has demonstrated notable resilience thus far. However, as the temporary boost from front-loading fades and the full impact of tariff implementation takes hold, the third-quarter outcomes may have offered a clearer glimpse into the path ahead, highlighting potential growth leaders and underperformers.
Regional economic overview
In this article, we focus on the economies of six countries in Southeast Asia: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. We start by setting the scene with a regional overview (Exhibit 2).
In the following section, we focus on six specific countries in Southeast Asia—Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam—examining their macroeconomic conditions and financial markets.
Indonesia
Indonesia’s economic growth eased slightly to 5.04 percent in the third quarter of 2025, following a stronger performance of 5.12 percent in the previous quarter. Household consumption, which accounts for just over half of the country’s economic growth, moderated during the third quarter, mirroring a similar slowdown in other key drivers, such as production and exports (Exhibit 3).
This mild deceleration occurred despite the government’s implementation of an economic stimulus package and Bank Indonesia’s (the central bank) efforts to boost growth through three policy rate cuts during the quarter. With quarterly growth fluctuating between 4.9 and 5.1 percent throughout 2025, achieving the full-year growth target of 5.2 percent will hinge on a stronger performance in the fourth quarter.2
Macroeconomic outlook
GDP: Indonesia’s GDP growth slightly decelerated to 5.04 percent in the third quarter of 2025, down from 5.12 percent in the previous quarter.3 While most sectors performed strongly, particularly education, business services, and tourism, a 1.98 percent contraction in mining output weighed on overall growth. This decline was driven by a slowdown in global demand for coal and reduced copper production.
On the expenditure side, government spending accelerated. However, other components, including consumption, investment, and exports, experienced softer growth.
Private consumption: Household consumption growth eased slightly to 4.89 percent in the third quarter, down from 4.97 percent in the second quarter. Household consumption continued to account for slightly over half of overall economic growth, and the latest figures reflect relative resilience in consumer spending, despite modest pressures from rising inflation and softening employment numbers.4
Trade: Indonesia’s exports remained robust, growing by 9.91 percent in the third quarter of 2025, following a strong 10.67 percent expansion in the previous quarter. While growth in the second quarter was driven by front-loading effects, in the third quarter, strong exports in non-oil and gas segments, including steel, machinery, and vehicles, as well as a surge in tourist arrivals, underpinned performance.5
Industrial activity: After accelerating to 5.68 percent in the second quarter of 2025, manufacturing output moderated slightly in the third quarter, growing by 5.54 percent.6 Looking ahead, prospects appear stable, with Indonesia’s PMI rising to 51.2 in October 2025 from 49.2 in July 2025, signaling stabilization. This marks the third consecutive month of factory activity expansion, underpinned by stronger new orders and steady production levels.7
Labor: The latest release of Indonesia’s National Labor Force Survey in August 2025 saw the unemployment rate edge higher to 4.85 percent, compared to 4.76 percent in February 2025.8 While the overall employment situation appears stable, a recent World Bank report on youth unemployment highlights that one in seven young people in Indonesia are unemployed. The report calls for deeper structural reforms to boost economic growth and drive job creation in Indonesia.9
Inflation: Indonesia’s inflation continued to inch higher to 2.65 percent at the end of the third quarter from 1.87 percent and 1.03 percent in the previous two quarters. This brings Indonesia’s year-to-date inflation to 1.82 percent, which is within Bank Indonesia’s target range of 1.5 to 3.5 percent. A spike in the gold price lifted inflation, along with selected food items such as red chili and chicken broilers, while rice—a key staple in Indonesia—saw prices decline, which helped moderate overall inflation.10
Financial markets
Currency: The Indonesian rupiah depreciated by 3.1 percent in the third quarter, erasing its 2.8 percent gain from the previous quarter, as concerns over domestic policy stances weighed on the currency.11 The currency has had a volatile year thus far, with Bank Indonesia reiterating its commitment to “boldly” intervene to stabilize the rupiah and restore market confidence.12
Policy rate: Bank Indonesia surprised markets with three consecutive policy rate cuts in the third quarter of 2025. In July, August, and September, the bank reduced rates by 25 basis points each, bringing the policy rate to 4.75 percent—the lowest level since October 2022. These moves reflect the central bank’s confidence in maintaining financial stability, while aiming to stimulate demand and bolster economic growth.13 However, at its October 2025 meeting, the central bank held rates steady. It signaled openness to future cuts, contingent on rupiah’s stability and the effectiveness of earlier rate reductions.14
Capital flows: FDI into Indonesia recorded its largest fall since the first quarter of 2020, declining by 8.9 percent in the third quarter of 2025, year on year. This marks the second consecutive quarter of FDI contraction, as rising geopolitical tensions dampened sentiment for investments into the country. The beneficiaries of FDI during the third quarter included base metal, mining, transportation, warehouse, and telecommunications. China, Hong Kong, and Singapore continued to be the largest FDI contributors.15
Malaysia
Malaysia’s economy expanded at a faster pace of 5.2 percent year on year in the third quarter of 2025, up from 4.4 percent in the previous quarter. This accelerated growth was driven by robust household demand, supported by favorable labor market conditions, income-related policy measures, and a strong rebound in export performance (Exhibit 4).
Investment activity remained stable, further contributing to third-quarter growth. The solid third-quarter performance brought Malaysia’s GDP growth for the first nine months of 2025 to 4.7 percent. Looking ahead, Bank Negara Malaysia (the central bank) remains optimistic that Malaysia will achieve its 2025 growth target of 4.0 to 4.8 percent. Domestic demand is expected to stay resilient, while strong performance in key subsectors, such as E&E, tourism, and mining, is likely to support growth and help mitigate external headwinds from tariffs and a moderation in global demand.16
Macroeconomic outlook
GDP: Malaysia’s GDP growth accelerated to 5.2 percent year on year in the third quarter of 2025, up from 4.4 percent in the previous quarter. Growth was primarily driven by the services and manufacturing sectors, supported by strong performance in consumer-related industries and E&E production. The mining sector rebounded sharply, expanding by 9.7 percent after contracting by 5.2 percent in the second quarter, buoyed by the higher production of liquefied natural gas (LNG) and crude oil. The construction sector sustained its robust double-digit growth, while the agricultural sector experienced a slight moderation in growth.17
Private consumption: Private consumption remained the key driver of economic growth and continued to see sustained increases, supported by robust labor market conditions, income-related policy measures, and government cash transfers to households. Household spending grew by 5.0 percent in the third quarter, matching the growth rate recorded at the start of the year, but slightly below the 5.3 percent growth in the second quarter.18
Trade: Malaysia’s trade activity broadly remained resilient in the third quarter. Exports grew at a faster pace of 6.7 percent, up from 3.3 percent in the previous quarter, driven by stronger performance in the E&E segment and improved demand for mining exports. The outlook for export growth remains positive, supported by E&E, inbound tourism, and the recovery in mining-related exports. Imports growth moderated to 0.4 percent from 9.0 percent in the second quarter, following reduced transactions in capital and intermediate imports.19
Industrial activity: The manufacturing sector grew stronger at 4.1 percent in the third quarter, from 3.7 percent in the previous quarter. Stronger production in E&E and consumer goods-related sectors helped prop up growth.20 Manufacturing conditions were mixed during the quarter. The PMI maintained an upward trend through August 2025 to 49.9, almost a three-year high, before softening slightly to 49.8 in September and 49.5 in October, as new orders and output moderated. Despite this, business confidence surged, signaling potential for improved operating performance in the near term.21
Labor: Malaysia’s labor market stayed robust, with unemployment continuing to be anchored at pre-COVID-19 levels. Unemployment remained constant at 3 percent in the third quarter. Labor demand strengthened, with overall employment increasing by 117,600 in the third quarter to 16.97 million. The labor participation rate improved from the second quarter’s historic high, growing by a further 0.1 percent to reach 70.9 percent in the third quarter.22
Inflation: Inflation remained unchanged at 1.3 percent in the third quarter and is expected to stay moderate, averaging between 1.0 and 2.0 percent for the rest of the year. This outlook reflects easing global cost pressures, stable domestic demand, and government measures aimed at mitigating the impact of domestic policy reforms on households.23
Financial markets
Currency: After rallying by 5.1 percent against the US dollar in the second quarter, the Malaysian ringgit traded within a narrow range in the third quarter to record a modest 0.05 percent gain against the greenback. Year to date in 2025, the ringgit has appreciated by 8.2 percent against the US dollar, supported by robust domestic economic prospects and the US Federal Bank’s hawkish stance amid soft labor market conditions and a less optimistic economic outlook in the United States.24
Policy rate: Bank Negara Malaysia reduced its policy rate by 25 basis points to 2.75 percent in July 2025, marking its first rate cut in five years. The move aimed to bolster the economy amid rising uncertainties in the global environment early in the third quarter.25 The central bank thereafter held its rate at the September and November policy meetings, as global conditions stabilized and Malaysia’s economy demonstrated resilience, posting better-than-expected growth in the third quarter.26
Capital flows: Malaysia’s FDI inflows rebounded sharply to 8.5 billion ringgit (US $2.04 billion) in the third quarter, up from 1.61 billion ringgit in the second quarter. While the third-quarter inflow was slightly less than half of the amount recorded during the same period in 2024, the recovery is expected to bolster investor confidence as Malaysia intensifies efforts to attract investments in high value-added sectors, such as advanced manufacturing, semiconductors, data centers, and renewable energy. Data center operations accounted for the majority of FDI inflows in the third quarter, with China, Japan, and Singapore emerging as the top investors.
The Philippines
The Philippine economy expanded by 4 percent in the third quarter of 2025, marking its slowest growth since the first quarter of 2021, when COVID-19 lockdowns weighed heavily on economic activity. Consumer and investor confidence were undermined by corruption issues involving public infrastructure projects, while a series of natural disasters further disrupted economic activities.
All major economic sectors experienced slower growth, with investments seeing sharp declines and private consumption posting its weakest performance since 2021. Exports, however, emerged as a rare bright spot, driven by stronger demand for the country’s goods, particularly semiconductors (Exhibit 5).
The third-quarter slowdown brought the year-to-date average growth for 2025 to 5.0 percent, falling short of the government’s full-year target of 5.5 to 6.5 percent. To meet the lower end of this target, fourth-quarter growth will need to accelerate to at least 6.8 percent27—a challenging feat, as the economy last achieved such a pace in 2022 during the post-pandemic rebound.
Macroeconomic outlook
GDP: The Philippines’ GDP growth decelerated sharply to 4.0 percent year on year in the third quarter, down from 5.5 percent in the previous quarter. Growth in the services sector, which accounts for two-thirds of the country’s GDP, slowed to 5.5 percent from 6.95 percent in the second quarter. The industrial sector, contributing 25.0 percent to the economy, expanded by 0.7 percent, its weakest performance since the first quarter of 2021. The agricultural sector faced significant challenges as typhoons impacted harvests during the third quarter, with growth slowing to 2.8 percent from 7.0 percent in the previous quarter.28
Private consumption: Household consumption, a key driver of the Philippine economy, slowed to 4.1 percent growth in the third quarter, down from 5.3 percent in the previous quarter.29 This represented the weakest pace of growth since the first quarter of 2021. Typhoon-related disruptions weighed on consumer spending, as widespread cancellations of activities, including work and travel, dampened economic activity.30
Trade: Exports strengthened in the third quarter, growing by 7 percent after a moderation in the previous quarter. This growth was primarily driven by goods exports, which surged by 11.6 percent, supported by robust performance in semiconductors, machinery, and transport equipment, as well as banana exports. Meanwhile, services exports rebounded from a 4.2 percent contraction in the second quarter, posting a modest year-on-year growth of 0.3 percent.31
Industrial activity: Manufacturing growth decelerated further in the third quarter, slowing to 1.2 percent from 2.7 percent in the second quarter and 4.3 percent in the first quarter.32 The PMI readings in the Philippines have been volatile in 2025, as external headwinds have fueled demand and production uncertainties. By the end of the third quarter, the PMI stood at 49.9, marking its third entry into the contractionary zone in four years. Manufacturing output declined as new orders, particularly from the domestic market, softened. In contrast, the PMI ended the second quarter at 50.7, an improvement from 49.4 at the close of the first quarter.33
Labor: Unemployment inched slightly higher to 3.8 percent in September 2025 from 3.7 percent at the end of the second quarter.34 Although the overall labor market remained stable, underemployment was prevalent as quality jobs generated in the market remained tight.35
Inflation: After easing to 1.4 percent in June 2025, inflation edged up slightly to 1.7 percent in September and remained steady in October. This brings year-to-date inflation to 1.7 percent, well within Bangko Sentral ng Pilipinas’s (the central bank) forecast range of 1.4 to 2.2 percent. The central bank anticipates limited inflationary pressures in the near term, expecting inflation to remain subdued and within target, supported by softening demand and stable global commodity prices.36
Financial markets
Currency: The Philippine peso depreciated by 4.6 percent against the US dollar in the third quarter, reversing the nearly 5.0 percent gains recorded in the first half of the year. Following the third quarter, the peso extended its decline, at one point reaching a record low against the dollar. This downward trend was driven by concerns over slowing economic growth, exacerbated by recent governance challenges and adverse weather disruptions.37
Policy rate: Bangko Sentral ng Pilipinas reduced its policy rate by 25 basis points in August 2025 and followed with a similar cut in October. The latest cut brought the policy rate to 4.75 percent, the lowest level seen since November 2022. The central bank remains dovish and sees scope for a more accommodative policy stance to spur economic activity, with inflation expected to remain benign and well anchored within its target range.38
Capital inflows: Foreign investment approvals in the Philippines continued their sharp decline in 2025, extending the downward trend from the previous year. After plummeting by 82.0 percent and 64.4 percent in the first two quarters, approved foreign investments dropped by 48.7 percent in the third quarter to US $1.25 billion (73.68 billion peso) compared to the same period in 2024. Nearly half of these investments were directed toward the manufacturing sector, while the power sector accounted for 25 percent.39 Corruption issues have dampened investor sentiment and led to a sharp pullback in investments, while tariff uncertainties have further delayed investment decisions.40
Singapore
Singapore’s economy posted solid growth in the third quarter, expanding by 4.2 percent, following the 4.7 percent growth in the previous quarter. This moderation reflected the tapering of a temporary boost from front-loaded activities earlier in 2025. Key growth drivers such as the manufacturing sector remained resilient, while the services sector experienced slower growth. NODX contracted during the quarter, impacted by US tariffs on trade flows (Exhibit 6).
Private consumption remained stable, underpinned by a strong labor market and benign inflation.
The strong performance in the third quarter contributed to a 4.3 percent growth in Singapore’s economy for the first nine months of 2025. In response, the Ministry of Trade and Industry (MTI) revised its full-year growth forecast upward for the third time in 2025, to “around 4.0 percent” from the previous range of 1.5 to 2.5 percent. Looking ahead to 2026, the MTI expects slower growth of 1 to 3 percent, as the full impact of US tariffs takes hold. Additionally, risks from a potential escalation in tariff actions and ongoing geopolitical tensions remain a concern, posing challenges to future investments, consumer spending, and hiring.41
Macroeconomic outlook
GDP: Singapore’s economy grew by 4.2 percent year on year in the third quarter, building on the 4.7 percent expansion recorded in the second quarter. On a quarter-on-quarter seasonally adjusted basis, growth accelerated to 2.4 percent in the third quarter, up from 1.7 percent in the prior quarter. Manufacturing, wholesale trade, and finance and insurance were the key sectors driving growth in the third quarter.
The manufacturing sector was a bright spark in the quarter, sustaining robust growth of 5.0 percent year on year, although slightly down from 5.1 percent in the second quarter. This expansion was driven by strong output growth in transport engineering, biomedical manufacturing, and electronics clusters. The services sector grew by 3.9 percent year on year in the third quarter, moderating from 4.7 percent in the second quarter. Most services clusters expanded, although growth was uneven. Notably, the food and beverage services segment contracted for the sixth consecutive quarter. The construction sector’s growth slowed to 3.6 percent, compared to 6.2 percent in the second quarter.42
Private consumption: Private consumption expenditure grew slightly slower at 3.6 percent year on year in the third quarter, from 3.7 percent in the previous quarter.43 Stable employment conditions and largely contained inflation will remain critical levers to hold up private spending.
Trade: Singapore’s total merchandise trade expanded by 8.5 percent year on year in the third quarter, accelerating from 7.0 percent growth in the previous quarter. While imports strengthened, export growth moderated, with the key NODX segment unexpectedly contracting 3.3 percent during the quarter.44 NODX experienced sharp declines of 42.8 percent and 28.8 percent in July and August 2025, respectively, as the impact of tariffs began to weigh on trade flows to the United States.45 NODX staged a surprise rebound in September, supported by strong electronics exports, yet despite this recovery, the gains were insufficient to offset the steep contractions in the first two months of the quarter. Trade volatility is likely to persist in the near term, given the ongoing headwinds from global trade tensions.46
Industrial activity: The manufacturing sector sustained its strong performance in the third quarter, expanding by 5.0 percent year on year, following the 5.1 percent growth recorded in the second quarter. Output increased across all manufacturing clusters except for general manufacturing. Transport engineering led the sector’s growth, supported by robust demand in the aerospace segment, followed by biomedical manufacturing and electronics.47 The manufacturing PMI closed the third quarter at 50.1, a slight improvement of 0.1 points from the end of the second quarter. However, in October 2025, the PMI edged down to 50, signaling a stagnation in the sector’s expansion amid ongoing volatility linked to tariff uncertainties.48
Labor: Singapore’s labor market remained stable in the third quarter, with the unemployment rate improving by 0.1 percentage points to 2.0 percent. Job creation continued to expand, and retrenchments eased slightly. However, resident and citizen employment showed signs of softening, as the number of residents and citizens who were unemployed increased during the quarter.49 In the near term, the labor market is expected to remain positive but uneven across sectors, with outward-oriented industries likely to face weaker prospects. Wage growth may also moderate amid ongoing cost pressures.50
Inflation: Inflation eased further to 0.6 percent in the third quarter, down from 0.8 percent in the second quarter and 1.0 percent in the first quarter. Slower price increases were observed in food, housing and utilities, and healthcare, while prices continued to decline in categories such as clothing and footwear, information and communication services and equipment, and recreation. Transport was one of the few segments to see price acceleration, driven by higher car prices and increased bus and train fares.51 The Monetary Authority of Singapore (MAS, its central bank) anticipates inflation to remain stable but subdued for the remainder of the year, with a modest and gradual uptick expected over the course of 2026.52
Financial markets
Currency: The Singapore dollar traded within a narrow range and broadly maintained its strength against the US dollar in the third quarter, following two consecutive quarters of appreciation. Year to date, the currency has gained slightly over 5 percent. Singapore’s strong fiscal discipline and robust economic performance continue to position the Singapore dollar as an attractive, safe-haven currency, which will likely provide support for its value.53
Policy rate: The MAS maintained its monetary policy stance in its July and October 2025 decisions, following earlier easing in January and April. This reflects a broadly resilient global growth environment, with contained downturn risks despite the fading impact of front-loaded activities, alongside a softening labor market and moderating spending. Singapore’s economy has outperformed expectations, while inflation is projected to remain largely subdued.54
Capital inflows: Singapore’s FDI net inflow declined to 45.9 billion Singapore dollars in the third quarter of 2025, down from 58.7 billion Singapore dollars in the previous quarter.55 However, on a year-on-year basis, the third quarter figure represents a 2.7 percent increase—highlighting Singapore’s continued strength and resilience as an investment destination as it seeks to attract investments in high-value-added manufacturing and emerging sectors, such as AI, digitalization, and climate technologies.56
Thailand
Thailand’s economy continued to lose momentum in the third quarter, expanding by just 1.2 percent year on year—the slowest growth rate in four years. While consumption remained resilient, other key growth drivers, including exports, production, and investments, weakened over the quarter (Exhibit 7).
In response, the Bank of Thailand (BOT, the central bank) implemented its third rate cut of the year in August, reducing the policy rate to a near three-year low. This move aims to stimulate consumption and provide support to small businesses as part of broader efforts to bolster near-term economic performance.
Thailand’s economy is projected to grow by 2.0 percent in 2025, down from the 2.5 percent growth recorded in 2024. Key factors to monitor in the final quarter of 2025 include the impact of tariffs and softening global demand on critical sectors, such as exports, manufacturing, and tourism, as well as the role of public policies in driving consumption and economic recovery.57
Macroeconomic outlook
GDP: Thailand’s economy grew by 1.2 percent year on year in the third quarter, slowing from the 2.8 percent growth recorded in the second quarter. The services sector remained a drag on overall performance, with growth decelerating to 2.3 percent from 3.4 percent in the second quarter. This slowdown was driven by weaker momentum in tourism, particularly a decline in international arrivals, alongside moderated growth in the financial services sector. Adding to the subdued quarter, both the manufacturing and construction sectors recorded their first contractions of 2025, further weighing on economic activity.58
Private consumption: Private consumption sustained a steady growth rate of 2.6 percent in the third quarter, supported by expansion across all expenditure categories. However, consumer sentiment has become increasingly cautious, as reflected in the consumer confidence index, which declined for the third consecutive quarter to 44.7, down from 48.0 in the second quarter of 2025 and 51.5 in the first quarter.59
Trade: Trade activity growth slowed in the third quarter as new tariffs took effect. Export growth eased to 11.5 percent, down from 15.0 percent in the previous quarter, with robust performance in the E&E segment offset by contractions in selected chemicals and agriculture exports. Similarly, import growth moderated to 12.2 percent compared to 16.8 percent in the second quarter.60
Industrial activity: After five consecutive quarters of growth following a successful turnaround, the manufacturing sector experienced a soft patch in the third quarter, contracting 1.6 percent year on year. Output dampened across both domestic and export-oriented segments, due to temporary factory maintenance shutdowns and factory relocations. In contrast, the sector had posted 1.7 percent growth in the second quarter.61
Despite the contraction, forward-looking indicators remain encouraging. The manufacturing PMI stayed firmly in expansionary territory throughout the third quarter, improving for the sixth consecutive month to reach 56.6 in October 2025. October also marked the strongest rise in production in 29 months, alongside a sharp increase in new orders. These trends suggest that the manufacturing sector is well-positioned to return to growth in the near term.62
Labor: The labor market continued to tighten, with the unemployment rate declining to 0.76 percent in the third quarter, down from 0.91 percent in the second quarter and 0.89 percent in the first.63 The improvement suggests resilience in the labor market even as Thailand’s broader economy remains fragile.
Inflation: Headline inflation in the third quarter was recorded at –0.7 percent, marking the second consecutive quarter of negative inflation. Core inflation, meanwhile, stood at 0.8 percent, down 0.2 percentage points from the second quarter. Persistently low energy prices have kept overall inflation subdued, contributing to a revised average inflation forecast of –0.2 percent for 2025.64
Financial markets
Currency: After appreciating by 5.1 percent against the US dollar in the second quarter of 2025, the Thai baht remained rangebound during the third quarter, ending the period at roughly the same level as it began. Year to date, the baht has been Asia’s second-best performing currency, strengthening by 5.9 percent against the US dollar. However, there are growing calls to address the baht’s strength, as it poses risks to Thailand’s economic competitiveness and could weigh on key growth drivers such as exports and tourism.65
Policy rate: In the third quarter, the BOT reduced its policy rate by 25 basis points to 1.5 percent in August, marking its third rate cut of the year and bringing the policy rate to a near three-year low. The move aimed to stimulate consumption, supporting small businesses and bolstering the broader economy. The BOT expects to face slower growth in the second half of 2025 due to uncertainties surrounding US trade policies and a decline in tourism arrivals.66
At its latest policy meeting in October 2025, the BOT opted to maintain the policy rate, allowing time for the August rate cut to take full effect. It emphasized its readiness to adjust its monetary policy stance as needed, depending on the outlook for the economy and inflation.67
Capital inflows: Thailand’s FDI declined in the third quarter, reaching 247.7 million baht, down from 469.9 million baht in the previous quarter. However, for the first nine months of 2025, Thailand secured a total of US $30.4 billion in FDI, marking an 82 percent increase compared to the same period in 2024. Key beneficiaries of FDI during this period included data centers and smart electronics manufacturing, with China, Hong Kong, and Singapore serving as Thailand’s primary investor base.68
Vietnam
Vietnam’s economy continued to accelerate in the third quarter to grow at 8.22 percent, the highest quarterly growth since 2011, excluding the COVID-19 pandemic-driven rebound in 2022. Growth was broad-based: Industrial output and services led on the supply side; consumption, exports, and investment were firm on the demand side (Exhibit 8).
This strong performance lifted economic growth for the first nine months of 2025 to 7.85 percent, bringing Vietnam closer to the government’s 8.0 percent target for the year and highlighting the economy’s resilience amid ongoing trade challenges.69
Macroeconomic outlook
GDP: Vietnam’s GDP growth remained robust in the third quarter, expanding by 8.22 percent year on year, up from 7.96 percent in the previous quarter. The industry and construction sector performed strongly, with growth accelerating to 9.46 percent from 8.97 percent in the second quarter. Manufacturing remained resilient, despite the impact of tariffs, although segments of the production sector with higher exposure to US exports began to show signs of slower growth in September as tariff effects took hold. Meanwhile, the services sector, which historically accounts for half of Vietnam’s GDP, maintained solid momentum, growing by 8.54 percent compared to 8.46 percent in the second quarter. Within services, the tourism sector continued to shine as a key driver of growth.70
Private consumption: Consumer spending remained resilient in Vietnam. Final consumption, where household consumption formed a major component, grew 8.07 percent, a slight uptick compared to 7.95 percent on a year-on-year basis—stronger than the 7.45 percent attained in the second quarter.71 Stable consumer demand continued to remain supported by strong labor conditions and inflation, which had largely been contained.
Trade: Vietnam’s exports performance held up despite the effects of tariffs kicking in from early August. In the third quarter, exports grew to 18.4 percent, strengthening slightly from the 18.0 percent growth recorded in the prior quarter. Shipments to the United States broadly held steady, and it remains the largest export market for Vietnam—a relief, as key product categories, such as smartphones, consumer electronics, and components, are exempted from US reciprocal import tariffs. Sectors impacted by tariffs, such as footwear and textiles, started to exhibit signs of slower growth.72
Industrial activity: Industrial momentum remained steady, with the Index of Industrial Production (IIP) rising by 9.1 percent year on year in the first nine months of 2025, slightly down from the 9.2 percent growth recorded in the first half of the year. The manufacturing and processing sectors continued to drive growth, particularly in the production of automobiles and televisions.73 The PMI showed notable improvement, increasing to 50.4 at the end of the third quarter from 48.9 at the end of the second quarter, signaling a return to expansion. The momentum carried into October, with the PMI climbing further to 54.5, the highest level since July 2024. Despite lingering concerns over tariffs, manufacturing prospects remain optimistic, supported by sharp improvements in output and new orders.74
Labor: The labor market remained stable in the third quarter. The unemployment rate improved slightly to 2.22 percent from 2.24 percent in the previous quarter. Wage growth remained steady, with average income increasing by 9.1 percent compared to the same period in 2024.75
Prices: Inflation eased slightly to 3.27 percent in the third quarter, down from 3.31 percent in the previous quarter. While prices declined in categories such as food, transport, and communications, all other expenditure categories experienced price increases, with healthcare seeing the sharpest rise of over 10 percent. The third-quarter inflation rate brought Vietnam’s year-to-date inflation to 3.27 percent, remaining below the National Assembly’s target range of 4.0 to 5.0 percent for 2025.76
Financial markets
Currency: The Vietnam dong continued to depreciate against the US dollar, declining by an additional 1.2 percent in the third quarter. Given Vietnam’s heavy reliance on exports, the currency remained under pressure, driven by ongoing tariff risks and external economic factors. This trend suggests that the dong could face continued weakness in the near term.77
Policy rate: The State Bank of Vietnam (the central bank) maintained its policy rate in the third quarter, upholding its monetary policy stance and leaving rates unchanged since June 2023.78
Capital inflows: Foreign investment remained a key driver of Vietnam’s economic growth in 2025, with the country continuing to attract substantial inflows. In the first nine months of the year, total registered foreign investment surged by 15.2 percent year on year to reach about 900 billion baht (US $28.5 billion). Disbursed investment amounted to US $18.8 billion, marking an 8.5 percent increase compared to the same period in 2024 and the highest level recorded in five years.79 Notably, over 80 percent of foreign investment was directed toward the manufacturing and processing sector, reflecting companies’ efforts to expand and scale their operations. This underscores Vietnam’s strong positioning as a leading manufacturing hub in the region.80