Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

ASEAN
Global tech firms invest billions into digital infrastructure in ASEAN
(02 January 2025) Tech firms from all over the world are pouring billions of dollars into digital infrastructure in Southeast Asia, driven by the rise of the region’s middle class and concurrent demand for digital services. The broader regional market remains underserved by available data capacity, with analysis by Maybank finding the region 55% to 70% underpenetrated in data centre supply compared to the likes of China, South Korea, and Japan. Different countries are offering various incentives to attract investments. While Thailand is offering corporate tax reductions and fast internet, Vietnam is offering financial incentives in the research and development space, land rental exemptions, and preferential credit. Singapore is framing itself as a start-up incubator hub, while Malaysia has its own raft of grants and incentives. Indonesia, on the other hand, is focusing on talent development in technology sectors. However, ASEAN governments also face challenges, such as how to properly regulate AI as well as properly develop the necessary digital talent to meet skills demand. 

SINGAPORE
Resale public housing prices in Singapore increase by 9.6% in 2024 
(02 January 2025) Resale public housing prices in Singapore increased by 9.6% in 2024, nearly double the 4.9% rise in 2023, according to preliminary government data. Resale transactions rose by 8% year-on-year, driven by strong demand and tight supply. The number of newly eligible flats for resale fell to 11,952 in 2024 from 30,920 in 2022, exacerbating market pressure. In August 2024, the government reduced the loan-to-valuation limit for resale flats from 80% to 75% and introduced higher grants for first-time buyers, further fuelling demand. Sales of resale flats exceeding SGD 1 million (USD 735,000) continued, prompting government warnings for buyers to “exercise prudence.” It has been noted that the market’s tightness and increased grants contributed to the price surge, and that further cooling measures may follow if high-value sales and transaction volumes rise in early 2025. These developments come ahead of Singapore’s 2025 general election, where housing affordability remains a critical issue.

MALAYSIA
GDP growth forecasted to moderate to 4.9% in 2025, slightly above official target range
(02 January 2025) Malaysia’s GDP growth is forecasted to moderate to 4.9% in 2025, slightly above the official target range of 4.5% to 5.5%, with domestic demand driving growth, supported by stable labour markets, civil service pay increases of 7% to 15%, and adjustments to the minimum wage. Public investment is expected to remain stable, underpinned by the MYR 25 billion GEAR-UP programme and MYR 120 billion in domestic direct investments over five years by government-linked entities. Infrastructure projects and private investment will benefit from favourable financing and ongoing approved investments. The unemployment rate is projected to decrease to 3.2%, with the gig economy expanding, representing 18.5% of the workforce as of October 2024. Bank Negara Malaysia is expected to maintain the Overnight Policy Rate at 3.00%, limiting monetary flexibility due to domestic price pressures. Residential property transactions rose by 6.1% in number and 10.4% in value year-on-year for H1 2024, while overhang units fell to 21,968 by September.

INDONESIA
Bank Indonesia intervenes in foreign exchange market to stabilise rupiah
(02 January 2025) Bank Indonesia intervened in the foreign exchange market on 2 January 2025 to stabilise the rupiah amid limited domestic supply caused by New Year holidays. The rupiah, which depreciated by 1% against the US dollar, faced pressure from global factors, including economic policy sentiment related to US President-elect Donald Trump and divergent growth trajectories in the US, Europe, and China. Indonesia’s annual inflation rate for December 2024 was 1.57%, marginally up from 1.55% in November and near the Reuters poll estimate of 1.60%. Core inflation remained steady at 2.26%, aligning closely with the 2.28% forecast. Bank Indonesia has maintained an inflation target of 1.5% to 3.5% for 2024 and 2025. Despite inflation nearing the lower bound of the target range, the central bank paused rate cuts following its September reduction, citing currency volatility and global market conditions as primary concerns.

INDONESIA
Indonesia’s planned VAT increase to be limited to luxury goods and services
(03 January 2025) On 1 January 2025, Indonesian President Prabowo Subianto announced that Indonesia’s planned VAT increase from 11% to 12% would be limited to luxury goods and services instead of applying broadly. This decision covers items such as vehicles with engines exceeding 4 litres, properties valued above IDR 30 billion, and luxury recreational vehicles, which already incur a luxury tax of 10% to 200%. The Ministry of Finance had set a 2025 state revenue target of IDR 2.189 quadrillion, with IDR 609 trillion expected from VAT, but it is unclear if this assumed the higher rate. Economists questioned the reliance on VAT for revenue, suggesting alternatives like progressive taxes on natural resources or the super-wealthy. Businesses had largely adjusted systems for the 12% rate before the announcement, causing operational challenges, though the decision was welcomed by consumers and retailers, who faced inflationary pressures and declining purchasing power. The change reflects Indonesia’s broader fiscal challenges, with VAT contributing 28% of government revenue and a tax-to-GDP ratio of 12.1% in 2022, significantly below regional and OECD averages.

THE PHILIPPINES
Central bank revises 2024 current account deficit projection to USD 10.4 billion
(03 January 2025) The Philippine central bank revised its 2024 current account deficit projection to USD 10.4 billion (2.2% of GDP), up from the earlier estimate of USD 6.8 billion, citing geopolitical shocks and potential changes in US trade policies. The 2024 deficit remains below the USD 11.8 billion (2.7% of GDP) recorded in 2023. For 2025, the current account deficit is expected to widen further to USD 12.1 billion (2.4% of GDP). Despite the growing deficit, the balance of payments (BOP) is projected to remain in surplus, with forecasts of USD 3.5 billion for 2024 and USD 2.1 billion for 2025, supported by financial account inflows. The central bank noted potential for global trade recovery in 2025, driven by moderating inflation and improved business activity.

THAILAND
Thai Chamber of Commerce estimates THB 160 billion economic loss from Trump’s trade policies
(01 January 2025) The Thai Chamber of Commerce (TCC) estimates a potential THB 160-billion economic loss for Thailand due to anticipated US trade policies under President-elect Donald Trump, including increased tariffs on imports. The TCC President highlighted risks to Thai exports with a surplus in the US market, such as hard-disk drives, semiconductors, tyres, air conditioners, and solar cells, alongside challenges in manufacturing, construction, and agriculture sectors. Trump’s proposed 60% import tariff on Chinese goods may cause an influx of Chinese products into Thailand, adversely affecting local industries but potentially encouraging foreign investment through production base relocation. TCC recommends diversifying trade and investment to India and forming partnerships with Vietnam. The Federation of Thai Industries (FTI) warned of possible US targeting of Thailand for its trade surplus, baht appreciation, and volatility in investments due to a proposed corporate tax reduction in the US from 21% to 15%. Concerns were raised about US withdrawal from multilateral frameworks, such as the Paris Agreement and Indo-Pacific Economic Framework, and its impact on Thailand. Both TCC and FTI emphasised the importance of proactive measures, public-private collaboration, and maintaining domestic industry competitiveness while attracting foreign investment.