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Southeast Asia’s Improved COVID Situation Offers a Positive Outlook For Economy Rebound

By 8 November, 2021June 30th, 2023No Comments

Tourists in Bangkok, Thailand

With intensive vaccine rollout and heavy restrictions, Southeast Asia has significantly improved its COVID situation towards the end of 2021. Regional governments are gradually lifting restrictions and pushing to reopen, aiming to strike a balance between virus containment and movement of people and money.

Southeast Asia’s COVID Cases

Southeast Asia’s top economies – Vietnam, Indonesia, the Philippines, Malaysia, and Thailand, all faced a surge in COVID cases during the summer of 2021. The number of COVID-infected citizens soared in Indonesia during June-July, making it the country with the highest rate of infections in the region. Vietnam, originally successful in preventing the disease, also suffered a severe outbreak from June of 2021.

Table showing number of confirmed COVID cases in Southeast Asia

With heavy restrictions in place, the rate of daily new COVID cases has decreased for most countries. Indonesia, once the pandemic centre of Southeast Asia, reported the lowest number of daily new cases among the top economies. Except for Thailand, other countries have reduced their daily record of infections to less than 5,000 cases.

Graph showing daily ne confirmed cases in Southeast Asia

Southeast Asia’s COVID Vaccination Progress

Making up for a slow beginning, Vietnam and Indonesia are speeding up their vaccination program with over 1 million doses administered daily in October. Thailand and the Philippines are lagging in the race, with around 5 to 6 thousand doses administered daily. Only Malaysia has fully vaccinated over 70% of its population.

Table showing vaccinations in Southeast Asia

All countries target to achieve herd immunity with at least 70% of the population fully vaccinated against COVID-19. There are several complications in reaching these deadlines. For example, shortage of doses, government and localities coordination and local anti-vaccine movement (particularly in the Philippines and Indonesia), just to name a few.

Vietnam and Indonesia both aim to achieve herd immunity by March 2022. The Philippines is set to immunize 60% of its population by the end of 2021. Malaysia has surpassed the 70% benchmark and plans to vaccinate 80% of its target population (adults aged 18 and over) by December 2021. Thailand aims to vaccinate 70% of its population within 2021, focusing on covering tourist-concentrated areas.

Countries are also introducing vaccination programs to children ahead of the new school year. In October 2021, the Philippines began a pilot program in hospitals to vaccinate minors aged 12 to 17 with underlying medical conditions. Thailand recently kicked off a vaccination program with the Pfizer vaccine, aiming for more than 5.04 million students, aged 12 to 18. Vietnam will also start vaccinating children aged 12 to 17 with the Pfizer-BioNTech vaccine, starting November 2021.

Future Outlook: GDP, FDI, Supply Chains, and Tourism

The surge in infected cases led several governments to apply COVID-zero strategies, including limited international and local movements, and halted business activities. Unsurprisingly, strict regulations carried a negative impact on the economy. After months of heavy restrictions that put the economy on the brink, countries in Southeast Asia have lifted several social curbs and, most importantly, planned to reopen.

According to Oxford Economics, Foreign Direct Investment (FDI) flowing into Southeast Asia remains strong. As the global value chains continue to adjust to higher labour costs and trade protectionism in China, Southeast Asia is likely to be the key beneficiary. London-based think tank Capital Economics projected the region’s economy to rebound strongly in the fourth quarter of 2021 as COVID cases have dramatically reduced.


Vietnam’s GDP declined sharply by 6.17% in Quarter 3 of 2021 – the first recorded negative growth since 2000. In the first nine months of the year, the country’s GDP has now only grown by 1.42%. The Ministry of Planning and Investment estimates the annual GDP growth of 2021 to be at 3-3.5% compared to 2.91% in the previous year.

Foreign investors remain optimistic about Vietnam’s long-term growth. Its role in the global supply chain is only expected to grow, as noted by American Chamber of Commerce in Vietnam. Information services company IHS Market also stated that Vietnam’s involvement in the global supply chains would not be diminished by the pandemic, since the costs to relocate would outweigh the costs of momentary disruptions.

The government is developing a roadmap to be fully open to international tourists by June 2022. A pilot program for fully vaccinated international visitors to Phu Quoc Island will be carried out in November 2021, before reopening Nha Trang, Ha Long, Hoi An, and Dalat in December.


Indonesia, Southeast Asia’s largest economy, is expected to grow by 4.5% in the third quarter of 2021, much lower than the 7.07% growth of the second quarter. Indonesia’s finance minister stated that domestic demand had improved since the second week of August as restrictions relaxed. Exports from Indonesia, the world’s largest exporter of thermal coal and palm oil, also spiked as prices reached a record high. The new official forecast for the annual GDP in 2021 is at 4%.

The Indonesian Investment Ministry disclosed that the rate of foreign investment in Indonesia in the third quarter of 2021 decreased by 2.8% quarter-to-quarter, but increased by 3.7% year-on-year (YoY). With 13% of total foreign investment, the housing sector, industrial estates, and offices received the most attention. The transportation, warehouse, and telecommunications sectors received around 12.3%. The government is targeting 900 trillion rupiahs in total investment in 2021. By September, Indonesia has reached 73.3% of the target.

Indonesia is bracing itself for the year-end holidays, as nearly 20 million people are forecasted to travel to Java and Bali. The government has implemented several protocols for reopening tourist sites and hospitality services.


Capital Economics projected an uptick in the Philippines’ GDP in the third quarter of 2021 from the second one. The second-quarter GDP was equivalent to an 11.8% growth YoY. Capital Economics also expects the fourth-quarter GDP to grow by over 4% compared to the third-quarter result and the annual GDP to grow 4.5% in 2021. The government set a target of 4-5% growth this year.

In the first half of 2021, FDIs to the Philippines amounted to US$4.3 billion, a 40.7% increase from the previous year’s level. The approved foreign investment reached a 45.5% increase YoY in the second quarter. The major investors to the Philippines in the quarter include the United Kingdom, which accounted for 55.6% of the total approved foreign investments, followed by South Korea (10%) and the United States (9.5%). 55.7% of the total foreign investment pledges are in the Information and Communication Industry (ICT). Construction came in second with a 16.1% share of total foreign investment commitments, while manufacturing came third with a 10.1% share.

The Philippines currently permits fully vaccinated international travellers from low-risk areas to arrive without quarantine. Most businesses in Metro Manila are allowed to operate at full capacity, while casinos, bars, and indoor tourist attractions can reopen at 30% capacity.


According to the Malaysian Institute of Economic Research (MIER), Malaysia’s economy is on the path of a V-shaped recovery. The GDP growth for 2021 is projected to be at 4.0%, slightly less than the average 4.9% growth of the pre-COVID period. Considering the improved COVID situation in Malaysia, Fitch Solutions has also revised the GDP growth forecast for Malaysia from 0.0% to 1.5% in 2021. Fitch Solutions’ forecast for 2022 remains at 5.5% growth in GDP.

In the first half of 2021, FDIs in Malaysia surged 223.1% YoY amid the pandemic, as stated by Malaysian International Trade and Industry Minister. FDI and domestic direct investment (DDI) have played a significant part in growing the company. FDI inflows in Malaysia targeted the manufacturing sector, which accounts for 79.9% of the total investment flow in the second quarter of 2021.

Archipelago Langkawi has reopened in October 2021 as part of the government’s Tourism Recovery Plan; however, the destination is only available for vaccinated domestic visitors.  The government plans to welcome domestic visitors to Tioman Island, Johor, Melaka, and the state of Sabah on the island of Borneo. International travelers will be welcomed after inter-state travel and tourism are running run smoothly.


Thailand’s economy is set to grow at a slower pace than previously expected. The Finance Ministry lowered its forecast to 1% growth in annual GDP, from 1.3% predicted in July. The ministry expects the economy to have declined by 3.5% YoY in the third quarter. As a reopening plan is rolling, the ministry forecasts a 3% growth YoY in the fourth-quarter GDP. Thailand’s trade performance was higher than expected, with a 17.1% growth in exports YoY for the first three quarters of 2021.

In the January-September period, Thailand’s investment pledges climbed to a 140% growth from the year before. Japan, the United States, and China were the top three sources of FDI applications. Industries that saw significant inflows of foreign investments include electrical and electronics, medical and chemical sectors.

With tourism representing 18% of its GDP, Thailand has been the most eager country to reopen its doors to international travelers. Since the last week of October 2021, Thailand has welcomed vaccinated travelers from more than 40 countries. Beginning November 1, travelers from 6 more countries and territories that Thailand considers “low risk” will be able to enter without quarantine. The government anticipates 1 million tourists to enter Thailand by March 2022.

After a long battle with the pandemic surge, Southeast Asia has been able to relax its stringent social restrictions. The intensive vaccination programs have played an important role in curbing the daily infection rates. While the road to rebound to pre-pandemic levels might have prolonged, the region’s top economies have made multiple measures to balance its pandemic control and economic recovery. The short-term disruption in supply chains did not diminish Southeast Asia’s growing importance in the global supply chains, as foreign investors are still keen to enter the region.

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