Economic growth across the ASEAN-5 presented a mixed picture in the second quarter of 2026, with Vietnam and Malaysia recording stronger growth compared with the first quarter, while Indonesia, the Philippines and Thailand experienced further moderation, according to the latest research from OCBC Group Research.
The weighted average GDP growth rate for the ASEAN-5 — comprising Indonesia, Malaysia, the Philippines, Thailand and Vietnam — eased to 5.0% year-on-year (YoY) in 2Q26, from 5.2% in 1Q26.
Despite the mixed performance, OCBC Research said regional resilience remains intact, with the balance of its 2026 GDP forecast revisions skewed towards upgrades.
Following the first-half 2026 GDP outturns, OCBC has upgraded its full-year 2026 growth forecasts for Indonesia, Thailand and Vietnam to 5.2%, 2.4% and 8.2%, respectively. In contrast, its forecast for the Philippines has been lowered to 3.2%.
Malaysia’s 2026 GDP growth forecast remains at 5.2%, unchanged from its previous forecast.
Domestic demand moderates across ASEAN-5
The regional slowdown was driven primarily by weaker domestic final demand, which slowed to 4.7% YoY in 2Q26 from 5.5% in 1Q26 on a weighted-average basis.
The Philippines accounted for much of the drag, while domestic final demand remained broadly stable in Indonesia and Malaysia.
Indonesia’s domestic final demand growth eased slightly to 6.5% in 2Q26 from 6.7% in 1Q26, while Malaysia recorded growth of 5.1%, compared with 5.2% in 1Q26.
For Indonesia and Malaysia, broad-based subsidies have continued to cushion households against higher global oil prices and retail fuel costs, supporting private consumption.
Investment trends, however, have been more varied across the region.
Malaysia’s investment growth normalises
Malaysia’s gross fixed capital formation (GFCF) growth slowed to 4.6% YoY in 2Q26, from 7.3% in 1Q26, led by the private sector.
OCBC Research said the moderation was consistent with its long-held view that investment growth would normalise following sharp increases associated with data centre construction in recent years.
Thailand, by comparison, continued to record relatively strong GFCF growth, reaching 9.1% in 2Q26, following 9.9% in 1Q26. Private-sector GFCF growth accelerated to 13.4% from 10.1%, likely reflecting an increase in data centre investments.
Indonesia’s GFCF growth accelerated to 6.9% YoY from 6.0%, supported by infrastructure development associated with the Merah Putih cooperatives and the infrastructure required for the Makan Bergizi Gratis, or free meals, programme.
The Philippines recorded a 13.7% YoY decline in GFCF, which OCBC Research described as a concerning sign of weakening private-sector demand. If sustained, the decline could lead to a significant deterioration in potential growth.
Vietnam’s investment and exports remain strong
Vietnam continued to stand out in the region, with gross capital formation growth jumping to 15.2% in 1H26, compared with 8.7% in 2025.
Final consumption growth also increased to 8.2% YoY in 1H26, from 8.0% in 2025, although growth moderated in the second quarter.
External demand remained another key driver of Vietnam’s economy. Goods and services export growth rose to 20.2% in 1H26, from 16.3% in 2025, while import growth increased to 26.4% from 17.1%.
Malaysia’s exports provide a boost
Malaysia also recorded a notable improvement in export performance during the second quarter.
Goods exports surged 16.8% YoY in 2Q26, compared with 2.5% in 1Q26. Thailand and the Philippines also maintained solid goods export growth at 14.1% and 17%, respectively.
The electrical and electronics (E&E) sector was a key contributor across these economies, with Malaysia’s semiconductor exports remaining a standout performer.
Malaysia’s services exports also recorded strong growth, rising 18% YoY in 2Q26, compared with 17.1% in 1Q26.
According to OCBC Research, Visit Malaysia 2026 and the large-scale development of data centres since 2021 are beginning to contribute to services export growth.
Manufacturing, construction and services support regional growth
On the supply side, manufacturing, construction and services remained important sources of strength for Malaysia and Vietnam during 2Q26.
The resilience of the manufacturing sector is consistent with strong export performance, particularly in the E&E sector, while the services sector continues to reflect broadly buoyant domestic demand.
Agricultural performance was more mixed. Malaysia’s agricultural output contracted 3.7% YoY, while growth slowed in Indonesia and Thailand but improved in the Philippines and Vietnam.
OCBC Research expects the impact of El Niño and rising supply-chain costs to keep agricultural output under pressure in the second half of 2026.
Infrastructure spending remains a priority
Construction sector performance also provides an indication of government priorities across the region.
Vietnam led construction growth, followed by Malaysia and Indonesia, as authorities focused on strengthening infrastructure spending while supporting and developing private-sector investment.
In Malaysia and Vietnam, these efforts are particularly focused on supporting private investment alongside infrastructure development.
The Philippines remains an outlier, with construction output contracting 13.9% YoY in 2Q26, marking a fourth consecutive quarter of contraction. OCBC Research attributed the weakness partly to the impact of past corruption scandals and subsequent shifts in public expenditure priorities.
OCBC upgrades three 2026 GDP forecasts
Following the first-half economic performance, OCBC Research has revised several of its full-year 2026 GDP forecasts.
| Economy | Previous forecast | New 2026 forecast |
|---|---|---|
| Indonesia | 5.0% | 5.2% |
| Malaysia | 5.2% | 5.2% |
| Philippines | 3.8% | 3.2% |
| Thailand | 1.5% | 2.4% |
| Vietnam | 7.3% | 8.2% |
The ASEAN-5’s average regional growth is forecast to ease modestly to 4.9% in 2026, from 5.1% in 2025, before improving to 5.0% in 2027.
Downside risks remain
Despite the region’s resilience, OCBC Research said the balance of risks remains skewed to the downside.
Key risks include limited progress on US-Iran resolutions, ongoing geopolitical tensions, a potential correction in AI and semiconductor trade, international and domestic policy missteps that could increase investor risk aversion, and weather-related disruptions.
The potential for an AI and semiconductor trade correction is particularly relevant given the importance of technology and electronics exports to several ASEAN economies, including Malaysia.
Monetary policy could remain on a tightening path
The mixed growth trends across ASEAN-5 economies further support the case for differentiated monetary policy responses across the region.
Despite differing fiscal responses to higher global oil prices, OCBC Research noted that the balance of GDP forecast revisions remains weighted towards upgrades. This continues to support its view that monetary policy across the region is likely to remain on a tightening path, with further interest rate hikes expected in 2H26 and 1H27.
The projected end-2026 policy rates are 6.50% for Indonesia, 2.75% for Malaysia, 5.50% for the Philippines, 1.00% for Thailand and 4.50% for Vietnam.
However, OCBC Research said the extent of rate hikes could be reduced if external pressures become more contained or inflationary pressures prove less severe than expected.
Overall, the latest GDP figures point to a resilient but increasingly divergent ASEAN-5 growth outlook, with export strength, infrastructure investment and domestic demand supporting several economies even as others face weaker private-sector conditions and heightened external risks.
