While China grapples with structural challenges, Malaysia and Singapore look set to benefit from global electronics demand, but face pressures from inflation, fiscal tightening and cautious consumer behaviour.

That’s the conclusion of the ICAEW Economic Insight Report Q4 2024, which paints a mixed picture for the region. Prepared by Oxford Economics, the report provides a detailed analysis of how China, Malaysia and Singapore are navigating unique challenges and opportunities heading into 2025.

The report predicts that policymakers across the region are likely to remain focused on stabilising growth while addressing long-term vulnerabilities.

China: slowing growth amid deflationary risks

China’s GDP growth moderated to 4.6% year-on-year (y/y) in Q3, slightly below the 4.7% recorded in Q2. While exports have been a strong driver, enjoying real double-digit growth, domestic challenges including weak consumer sentiment and a sluggish property market persist. As a result, export growth is expected to slow in 2025, though there may be short-term boosts from US fiscal policies.

Deflationary pressures remain a concern, with the GDP deflator negative for the sixth consecutive quarter and producer prices contracting by 2.9% y/y in October. In response, Chinese authorities have introduced aggressive monetary and fiscal policies, including a policy rate cut, liquidity injections and measures to restructure local government debt.

Despite some recent improvements in retail sales and housing prices in major cities, structural issues persist. Oxford Economics predicts China’s GDP growth to slow further to 4.4% in 2025, compared with an expected growth rate of 4.8% in 2024.

Malaysia: electronics bolster resilience amid consumer slowdown

Malaysia’s economy grew by 5.3% y/y in Q3, driven by robust investment growth and strong demand in the electronics sector. Private investment surged by 15.3% y/y, reflecting optimism among foreign businesses, particularly semiconductor firms expanding operations in Malaysia. However, consumer spending growth slowed to 4.8% y/y from 6% in Q2, weighed down by inflation risks and weaker tourism recovery.

Exports, particularly electronics, remain a bright spot, with real export growth accelerating to 11.8% y/y in Q3. However, non-electronics exports have been largely flat and the electronics boom is expected to moderate in 2025. Pressure on the Malaysian ringgit and potential inflationary effects from subsidy cuts are likely to keep monetary policy steady, with no rate cuts anticipated in 2025.

Singapore: manufacturing leads, but challenges persist

Singapore’s GDP growth rebounded to 5.4% y/y in Q3, driven by a strong recovery in manufacturing and particularly in the electronics sector, which grew by 11% y/y. Domestically-produced electronics exports surged by 17% y/y, underscoring the sector’s significance as a growth engine.

However, other sectors face challenges. Services exports growth softened to 4.8% y/y in Q3 from 9.4% in Q2, while domestic consumption is under pressure from elevated interest rates and increased outbound tourism. Private consumption grew 6.9% y/y in Q3, but is expected to slow to 2.5% in 2025 as global economic momentum remains subdued.

The report forecasts a more moderate pace of growth for Singapore in 2025, with electronics continuing to play a key role, although at a slower pace.

Suren Thiru, ICAEW Economies Director, comments: “Despite a weak China, 2024 has proved to be a reasonably strong year for the South-East Asia region, bolstered in part by strong global demand for electronics and resilient domestic demand, which have supported economic output. Next year could prove more turbulent, with growing global uncertainty – including possible new US tariffs amid Donald Trump’s second presidential term – likely to weigh on overall activity.”