(Aug 19): Vietnam retained its crown as Southeast Asia’s fastest-growing major economy in the second quarter, with Thailand the laggard, as tech and energy dictated varied fortunes across the region.

Malaysia and Singapore were the second- and third-quickest expanding, helped by robust demand for semiconductors and other components used in global technology supply chains. 

Along with Thailand, the Philippines was also more exposed to surging energy costs stemming from conflict in the Middle East. A sharp pullback in infrastructure spending additionally weighed on growth in the Philippines.

he divergence underscores Southeast Asia’s reputation as an increasingly important alternative to China for manufactured exports. However it also highlights the uneven benefits of that shift, as economies with companies crucial to the AI-related technology supply chain prove more resilient, while those more vulnerable to expensive imported energy lose momentum. 

Policymakers across the region are now grappling with how to cushion businesses and consumers from volatile oil prices without undermining economic growth.

“Growth diverged across countries, dictated by the degree of domestic resilience in the face of the Middle East crisis and the share of exposure to technology exports” within the trade mix, DBS Group Holdings Ltd economists Chua Han Teng and Radhika Rao said.

Expansion will probably only continue to bifurcate given the unresolved conflict in the Middle East and sustained global demand for technology exports spurred by artificial intelligence (AI)-related hardware.

Oversea-Chinese Banking Corp (OCBC) on Wednesday upgraded its full-year forecasts for Vietnam and Indonesia to 8.2% and 5.2% respectively. The Philippines’ outlook was downgraded to 3.2% from 3.8% while Thailand was nudged slightly higher to 2.4%, thanks to a stronger private sector buoyed by increased data centre investments.

“Despite differing fiscal policy responses to higher global oil prices, the balance of revisions remains skewed towards growth upgrades rather than downgrades,” economists led by Lavanya Venkateswaran wrote. “This supports our view that monetary policy across the region is likely to remain on a tightening path.”

Singapore, meanwhile, upgraded its 2026 economic growth forecast earlier this month as the AI boom lifted trade and manufacturing, offsetting the drag from the war in Iran. 

“The global AI investment boom has been stronger than expected,” the Ministry of Trade and Industry said in a statement. “For the rest of the year, a further acceleration in AI-related capital expenditure is expected to lift the growth prospects of economies plugged into the global technology value chain.”