Demographics, rising income, geopolitical shifts to drive ASEAN’s growth

The 10 member states of the Association of Southeast Asian Nations (ASEAN) are on the cusp of a tremendous leap forward in socio-economic progress and their growth will be propelled by four mega-forces, including favourable demographics, rising income levels, geopolitical shifts and digital tailwinds, according to the World Economic Forum (WEF).

The WEF has identified rising income levels to be a driving force for the future of consumption in ASEAN as the income levels would grow annually by 6-8 per cent in the region, creating economies powered by the middle class. The highest increase in income is expected to happen in Việt Nam.

Further fuelling consumption will be a significant increase in the number of high- and upper-middle income households in emerging ASEAN, which will nearly double from 30 million in 2019 to 57 million in 2030.

Besides the rising income levels, the WEF identified favourable demographics to be another driving force for the future of consumption in the region. A young, tech-savvy population, entering the workforce and migrating to big and small cities, would spur consumption in emerging ASEAN members.

The WEF states that emerging ASEAN will be the engine of growth over the next decade, driving 98 per cent of the increase in the working population and contributing 70 to 80 per cent of the new consumer population.

ASEAN’s working-age population will increase by 40 million by 2030, with Indonesia contributing more than half of that group. This is in comparison to China’s working-age population which is expected to reduce to 30 million in the same period.

This explosion of the working middle-class would materially boost productivity and spending to the point that the GDP growth rate of emerging ASEAN is expected to overtake China, the WEF noted.

In addition, labour costs in emerging ASEAN are also lower than in many other parts of Asia. Việt Nam’s labour costs are said to be 50 per cent that of China’s. The combination of an expanding workforce, low labour costs and the potential of productivity gains is highly attractive for investment and growth.

Shifts in global geopolitics and local regulations will also open the door for foreign direct investments (FDI) and other opportunities in ASEAN, according to the WEF.

The last force that would drive ASEAN’s growth was digital adoption, the WEF said, adding ASEAN’s digital economy would become truly inclusive as consumers adopt digital, investors fund innovative digital businesses and governments support key digital transformation programmes.