Emerging Asia is expected to remain one of the most enticing regions for business leaders and investors over the next two decades, given its consumer-class development, digital transformation, and rapid urbanisation. This article provides an overview of the current economic situation in China, India, Indonesia, Thailand, Vietnam, Malaysia, the Philippines, and Cambodia.
Common themes throughout this diverse region is a rising trajectory of key social and economic indicators and a strong rebound from the global COVID-19 pandemic. During the past two decades, emerging markets in Asia have outpaced other emerging economies, with India, China, Cambodia, and Vietnam experiencing an annual average real GDP growth of more than 6% between 2000 and 2020. Post-pandemic growth is slower but still positive and increasing, with Cambodia even projected to hit 7%.
And although much of emerging Asia still has a long way to go to catch up to developed economies, the region’s long-term prospects will remain positive as developing Asian markets focus on rebuilding, modernising, and regaining their growth momentum.
Top emerging markets in Asia in numbers
The following table provides an overview of major economic rankings for the eight countries:
|GDP RANKING (US$M) (IMF 2023)
|EASE OF DOING BUSINESS SCORE (2020)
|GLOBAL INNOVATION INDEX RANKING (2022)
China has the world’s largest emerging economy, incorporating economic management through industrial regulations and strategic five-year initiatives. The Chinese economy consists of government-owned enterprises, mixed-ownership businesses, and a vast private sector. It is also open to investment from overseas.
The government initiated transformational economic reforms in 1978. These led China to become the fastest-growing major economy in the world, with average growth rates of over 10% during the last 30 years. China’s 2023 GDP reached US$19.4 trillion, up 8.1% from the previous year, thus surpassing the European Union and second only to the US at US$26.9 trillion, according to the International Monetary Fund (IMF).
Equally impressive is China’s world-leading position in terms of purchasing power parity (PPP), which takes into account local inflation rates and goods and services costs. However, ranked by GDP per capita, PPP falls to 73rd globally.
China was 28th in the last Global Competitiveness Report and 31st in the Ease of Doing Business Index, which places it among the “very easy” countries. It also rose from 14th to 11th in the 2022 Global Innovation Index, making it third in Asia and Oceania and first in the world among upper-middle-income and newly industrialised economies.
China’s economic outlook
China faces significant geopolitical, environmental, and demographic (ageing population) challenges. Nevertheless, it is expected to become an even more influential international player in the coming years. Already number two in terms of nominal GDP, some estimates have it overtaking the US as the world’s largest economy by 2028.
To achieve this, the Asian superpower lays out its intentions in the current five-year plan. It includes accelerating technical development, stimulating private investment and domestic consumption, and addressing, at least in part, some of the existential problems mentioned above. Inflation is likely to remain low, permitting a more accommodative monetary policy.
India’s rise as an emerging market came after the trade globalisation and other significant economic reforms of 1991. The economy has since been growing steadily at comparatively high rates. It averaged 7.1% in the last decade, with occasional fluctuations caused by severe socio-economic challenges. India’s growth rate is predicted to stabilise at 8% over the next few decades, thus making it the world’s fastest-growing economy.
Today, India is the world’s fifth-largest economy in terms of nominal GDP and the third-largest in terms of PPP. Similar to China, when adjusted for per capita GDP (India’s population is now larger than China’s and number one globally), PPP falls to 127th.
India’s economic outlook
India’s long-term economic growth is primarily due to the expansion of the service and manufacturing sectors, exports and foreign investment, a young and steadily growing working-age population, and a rapidly expanding middle class driving consumer market expansion.
India is expected to become the third-largest consumer economy by 2025, with consumption predicted to triple to US$4 trillion, according to a Boston Consulting Group estimate. It is also projected to surpass the United States as the world’s second-largest economy in terms of PPP by 2040.
Indonesia’s emerging market economy features rich and diverse natural resources, controlled inflation, political stability, and relatively developed financial systems. It is easy to see why many investors are enthusiastic: A country with over 277 million people, GDP growth of around 5% per year, and a growing middle-class consumer market is an appealing prospect.
Indonesia was heavily damaged by the Asian financial crisis in 1997, both politically and economically; however, it has achieved significant progress since then. It is nowSoutheast Asia’s largest economy and a member of the G20, where it is the third fastest-growing economy following only India and China.
Indonesia is today the world’s 16th-largest economy in terms of nominal GDP and seventh in terms of PPP. Similar to China and India, when adjusted for its population of 275 million, PPP falls to 98th in the world.
Over the past few decades, the country has shifted from a heavy reliance on agriculture to a more balanced economy that reduces its historical focus on primary exports. The current key driver is private domestic consumption stimulated by a large market and growing middle class of almost 70 million people (55 % of GDP).
Indonesia’s economic outlook
Indonesia’s economic planning is based on their 20-year development strategy that spans from 2005 to 2025. The strategy is divided into five-year medium-term development plans, each with its own priorities. The main objective is to further develop Indonesia’s economy by enhancing its human capital and global competitiveness. The country is predicted to have the world’s 4th largest economy by 2045, with an expected per capita income of US$29,000.
Thailand’s emerging free-market economy, 27th in the world and second in Southeast Asia after Indonesia, has a nominal GDP of roughly US$575 billion. PPP is 23rd globally and 74th when adjusted for per capita GDP, just behind China and equal to the global mean.
Thailand has a robust domestic market and a growing middle class, with the private sector as the main growth engine. Thailand’s economy is well integrated into the global market, with exports accounting for more than 70% of GDP. It also has a large industrial sector (40% of GDP) and a strong and growing services sector (50% of GDP), mainly focused on tourism and financial services.
Given the importance of exports, Thailand has been a regional leader in trade facilitation and liberalisation, particularly with its Asian neighbours. Thailand is an important member of ASEAN, with a strategic location that offers easy access to the grouping’s market of over 660 million people. Additionally, well-developed transportation infrastructure gives Thailand easy access to China, India, Japan, and Korea, expanding the consumer market to even more significant proportions.
Thailand’s good relations and growing network of free trade agreements with other countries have increased its trade both within and outside the region. Together with its strategic location, these factors have made it a regional hub for international trade and travel, as well as a centre for a variety of industries, the most noteworthy of which are automotive and agriculture. Thailand has been favoured by numerous enterprises, media companies, and international organisations due to its investment climate, open society, and entrepreneurial spirit.
Thailand’s economic outlook
Looking to the future, Thailand’s government has outlined a 20-year plan to achieve high-income status by 2036. The plan includes a wide range of top-down development initiatives, particularly in infrastructure and human capital, to transform Thailand into an innovative, value-based economy focusing on areas like automation and robotics, biofuel and biochemicals, aviation, logistics, and digital.
Vietnam is another one of the world’s fastest-growing economies. The shift in labour allocation from agriculture to manufacturing and services has contributed to the country’s rapid economic growth. Private investment, robust tourism, rising earnings, and increased urbanisation have also contributed to Vietnam’s development.
The country’s GDP growth increased to a 10-year high of 7.1% in 2019, then fell due to the COVID-19 outbreak but remained positive in 2020 and 2021 at 2.9% and 3.8%, respectively. According to a recent IMF forecast (October 2021), GDP growth in Vietnam is predicted to reach 6.8% in 2023, subject to post-pandemic global economic recovery.
The IMF puts Vietnam’s GDP at US$450 billion, 34th worldwide and ahead of both Malaysia and the Philippines. PPP for Vietnam also places it ahead of those two; per capita GDP PPP is 103rd.
Vietnam’s economy is primarily based on state-owned sectors such as textiles, furniture, food, plastics, paper, tourism, and telecommunications. Even before COVID-19, Vietnam had already established itself as a favoured destination for offshore manufacturing, drawing many overseas manufacturers away from China. With the pandemic, the disrupted global supply chains and exodus of manufacturers from China only benefitted Vietnam more. It now has a solid potential to attract FDI and boost its manufacturing capability even further.
Vietnam’s economic outlook
Vietnam’s GDP growth is expected to slow from 2021 to 2040 compared to the previous decades, but the country’s economy is well-positioned to remain a strong performer. Vietnam’s solid economic foundations will continue to support long-term economic growth: Its favourable demographics and robust export manufacturing sector give it the potential to become Asia’s next production powerhouse.
Malaysia’s emerging economy is one of the wealthiest in Asia, despite its relatively small population of about 32 million people. Malaysia’s GDP ranks 35th globally and fourth within ASEAN, and its per capita income of US$12,295 qualifies it as an upper-middle-income country. PPP adjusted for population size ranks 54th globally, just behind Turkey and Greece.
Since gaining independence in 1957, Malaysia’s economy has effectively diversified from commodity-based and agricultural to one that currently features robust manufacturing and service sectors. The transition has made the country a prominent exporter of electrical appliances and components. Malaysia is also strategically well-located in the middle of ASEAN, surrounded by the nine other member nations.
Today, Malaysia has one of the world’s most open economies, with a trade-to-GDP ratio of more than 130% since 2010. The country’s openness to trade and investment has played a key role in job creation and income growth, with around 40% of jobs linked to export operations. Malaysia also boasts one of the highest living standards in Southeast Asia and a low unemployment rate of 4.7% (IMF, October 2021).
Malaysia’s economic outlook
Malaysia is on track to becoming a high-income nation by 2024. The most recent five-year development plan (2021-2025) presents a path toward advanced economy status through a wide range of objectives which prioritise equity, inclusivity, environmental sustainability, and infrastructure and human capital development.
The Philippines 🇵🇭
The Philippines is one of the world’s fastest-growing emerging markets. According to the IMF, the Philippines’ economy was the world’s 36th largest by nominal GDP in 2023, the 12th largest in Asia, and the third largest in ASEAN after Indonesia and Thailand. Philippine PPP is 29th in the world but falls to 117th when considering per capita GDP; the population is around 115 million people.
Business activities are robust, with a strong service sector performance, including real estate, business process outsourcing, and the finance and insurance sectors. With growing urbanisation, an expanding middle class, and a vast and young population, the country’s economic vitality is based on strong consumer demand supported by a vibrant labour market and substantial overseas remittances.
Growth is bolstered by strong economic fundamentals and an internationally recognised competitive workforce. With an average annual growth rate of 6.4% between 2010 and 2019, up from 4.5% between 2000 and 2009, the country is on track to becoming upper-middle-income in the near future.
The Philippines’ economic outlook
AmBisyon Natin 2040, the Philippine government’s twenty-five-year economic development vision, lays out the country’s growth path in detail. It emphasises the importance of relevant, inclusive, and long-term economic growth. The per capita income is targeted to increase by at least three-fold during the 25 years up to 2040, and the economy is intended to become the fourth largest in Asia and the 19th globally by 2050.
With a GDP ranked 109th in the world and a population of only 16 million, Cambodia might be seen as an outlier in this list. However, it is an emerging market that has experienced a remarkable economic transformation over the past two decades. It has continuously been one of the world’s fastest-growing economies and there has been rapid development from an agricultural-subsistence to a market-based, lower-middle-income economy. This has been fuelled by strong growth in the textile, garment, footwear, tourism, and construction sectors.
Among many of Cambodia’s competitive advantages are its young population, cost-effective labour force, favourable tariff access, and strategic location between Vietnam, Thailand, and the South China Sea. These attributes allow the country to engage in global value chains, with companies adopting ‘Plus one’ production practices to complement existing operations in neighbouring countries and benefitting from Cambodia’s free trade access and low-cost production. International enterprises are also entering the market to target the increasing middle class in Phnom Penh with high-end shopping and services.
Cambodia’s economic outlook
Cambodia aims to achieve upper-middle-income economy status by 2030 and high-income economy status by 2050. To achieve this, the Royal Government of Cambodia has undertaken various steps to assist in faster capital market development. The infrastructure and support Cambodia requires for long-term growth will be provided by educating local investors and corporations, introducing audit requirements and accounting standards, and licensing market players such as fund management companies, custodian banks, and securities brokers.
These emerging markets in Asia have recorded strong and stable growth over the past few decades. They have increased their macroeconomic flexibility, continued to industrialise, urbanise, and integrate into the global economy, and experienced favourable demographic developments. In the future, these advancements will continue to create high-growth opportunities for entrepreneurs and investors across Asia and beyond.
And despite facing several challenges, such as the continued rebound from COVID and risks of future volatility, emerging Asia’s growth is projected to remain strong while providing valuable access to rapidly expanding production and consumer networks.
If you have ambitions in emerging markets in Asia and would like advice or assistance in setting up a business, contact Acclime for support throughout any stage of the process.