Economic growth across ASEAN-5 economies presented a mixed picture in the second quarter of 2026, with Malaysia and Vietnam strengthening while Indonesia, the Philippines and Thailand recorded slower growth, according to OCBC Group Research.
The weighted average growth rate for the ASEAN-5 — comprising Indonesia, Malaysia, the Philippines, Thailand and Vietnam — eased to 5.0% year-on-year (y-o-y) in 2Q26, from 5.2% in the first quarter.
In a report dated Aug 19, OCBC said the region’s resilience remained intact despite differing growth drivers, higher global oil prices and continued geopolitical uncertainties.
Following the first-half growth performance, OCBC revised upward its 2026 GDP growth forecasts for Indonesia to 5.2% from 5.0%, Thailand to 2.4% from 1.5%, and Vietnam to 8.2% from 7.3%.
However, it lowered its forecast for the Philippines to 3.2% from 3.8%.
OCBC maintained its Malaysia GDP growth forecast at 5.2% for 2026, following Malaysia’s stronger-than-expected 2Q26 performance.
Malaysia, Vietnam benefit from stronger external demand
OCBC said the improvement in Malaysia and Vietnam was supported by stronger manufacturing, construction and services activity, alongside robust export growth.
Malaysia’s goods exports surged 16.8% y-o-y in 2Q26, compared with just 2.5% in 1Q26, with the electronics and electrical appliances sector, particularly semiconductors, remaining a key growth driver.
Services exports also strengthened, expanding 18% y-o-y in 2Q26, up from 17.1% in the previous quarter.
OCBC attributed the resilience partly to Visit Malaysia 2026 and the large-scale data centre investments that have been underway since 2021.
Domestic demand in Malaysia remained broadly stable, with domestic final demand growth easing only marginally to 5.1% in 2Q26 from 5.2% in 1Q26.
Broad-based subsidies have continued to cushion households from higher global oil prices and support private consumption, OCBC said.
However, investment growth moderated. Malaysia’s gross fixed capital formation (GFCF) expanded 4.6% y-o-y in 2Q26, down from 7.3% in 1Q26, mainly due to slower private-sector investment.
OCBC said this was consistent with its view that investment growth would normalise following the sharp increases associated with data centre construction in recent years.
Vietnam leads regional growth
Vietnam remained the fastest-growing economy among the ASEAN-5, with GDP growth accelerating to 8.4% y-o-y in 2Q26, from 7.9% in 1Q26.
The country’s growth was supported by strong domestic demand, investment and external trade.
Final consumption growth rose to 8.2% in the first half of 2026, compared with 8.0% in 2025, while gross capital formation jumped 15.2%, from 8.7% previously.
Exports of goods and services also remained robust, increasing 20.2% in 1H26, compared with 16.3% in 2025.
Vietnam’s strong performance prompted OCBC to raise its full-year 2026 growth forecast to 8.2%.
Indonesia, Thailand see slower growth
Indonesia’s GDP growth moderated to 5.3% in 2Q26, from 5.6% in 1Q26, although OCBC raised its full-year forecast to 5.2%.
Domestic final demand remained relatively resilient at 6.5%, compared with 6.7% in the previous quarter, while GFCF accelerated to 6.9% from 6.0%.
OCBC attributed the investment momentum partly to the buildout of the Merih Putih cooperatives and infrastructure supporting the government’s free-meal programme.
Thailand’s growth slowed to 1.9% in 2Q26, from 2.8% in 1Q26. Nevertheless, stronger investment activity, including a pickup in data centre investments, led OCBC to significantly upgrade its 2026 growth forecast to 2.4% from 1.5%.
Philippines remains the weak spot
The Philippines recorded the weakest 2Q26 growth among the ASEAN-5, with GDP expanding just 2.3% y-o-y, down from 2.8% in 1Q26.
OCBC highlighted the sharp contraction in investment as a key concern. GFCF fell 13.7% y-o-y, raising concerns about weakening private-sector demand and potentially lower future potential growth.
Construction output also contracted 13.9% y-o-y in 2Q26, marking its fourth consecutive quarterly decline.
As a result, OCBC cut its 2026 Philippine growth forecast to 3.2% from 3.8%.
Regional growth outlook remains resilient
Despite the mixed performance, OCBC said the balance of forecast revisions remained skewed towards upgrades, supporting its view that monetary policy across the region could shift towards tighter settings.
The research house expects further interest rate hikes across the region during 2H26 and 1H27, although the pace could be slower if external pressures ease or inflation remains more benign than expected.
For Malaysia, OCBC expects Bank Negara Malaysia to keep the Overnight Policy Rate (OPR) at 2.75% in 2026, before raising it to 3.0% in 2027.
It forecasts Indonesia’s policy rate at 6.5% by end-2026, the Philippines at 5.5%, Thailand at 1.0% and Vietnam at 4.5%.
Overall, ASEAN-5 growth is forecast to moderate slightly to 4.9% in 2026 from 5.1% in 2025, before improving to 5.0% in 2027.
OCBC, however, warned that risks remain skewed to the downside, citing limited progress on resolving the US-Iran tensions, lingering geopolitical risks, a potential correction in artificial intelligence and semiconductor trade, policy missteps that could trigger greater investor risk aversion, and weather-related disruptions.
