BCG report highlights the growing upper wealth classes of ASEAN

30 November 2018 4 min. read
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Home to 650 million people and an economy worth $6.5 trillion, the economic development of South East Asia has seen a rising middle class across the region.

The Southeast Asian economies have seen decades of sustained, high-level economic growth. The region is home to around 650 million people, with total GDP in 2017 in excess of $6.5 trillion. And the region is further projected to see strong economic growth going forward, at around 5% CAGR to 2030 – effectively doubling the region’s economic clout.

This has led to a marked rise in the size of the middle class. As a consequence of the changing demographics, the region will likely see a shift in how consumers buy their products in the future. A new analysis from The Boston Consulting Group on the digital integration of the ASEAN bloc highlights the changing wealth and population demographics in the region.Southeast Asia’s Middle-Class and Affluent ConsumersThe strong economic growth of Southeast Asia in recent years, which according to a recent McKinsey study includes 8 of the world’s 18 identified recent and longer-term outperforming emerging economies (those which have seen annual per capita growth of 3.5 percent over the past 50 years or 5 percent over 20), has seen a corresponding rise in incomes, with growing numbers of citizens becoming affluent.

The number of middle class and affluent (MACs) has increased steadily, with Malaysia out ahead at 78% of its population in 2017, followed by Thailand at 60% and Indonesia at 44%. The lesser developed countries, Vietnam and Philippines, in terms of current MACs, are set to see solid growth in the years ahead, at 5.5% apiece, while Malaysia and Thailand will see growth slow to 2.9% and 2.2% respectively. Altogether, the MAC numbers in the region are expected to rise from 40% today to 65% in 2030.Affluent Consumers Are Proliferating Faster Than the Middle ClassWhile the middle class is set to boom in the various SEAsian countries, the number of affluent, those with incomes in the top income segment of the respective income ranges, will also see significant increases in the years ahead. In Indonesia the group will grow from 24 million to 62 million by 2030, a CAGR of 8%. Meanwhile the established middle class will grow by 7% annually, from 26 million to 65 million. In the Philippines the number of affluent is set to see an even sharper increase, up from 20% this year to 34% by 2030, while the established middle class sees little movement, at around a 4 percentage-point increase.

Vietnam meanwhile will see the most significant increase in the number of affluent, with an 11% CAGR or an increase from 5 million to 17 million to the year 2030, while Thailand will see the number of affluent increase by 4% annually to 2030. Across all the countries, the number of poor is set to fall significantly over the coming decades, with all but the Philippines falling below 10% of their respective populations by 2030.Digital Influence and Engagement Among ASEAN ConsumersThe region is also contending with increased urbanisation. The region is set to see urbanisation increase from 48% to 57% by 2030, representing around 87 million people moving into an urban centre across the region. This is likely to be a mixed blessing, on the one side, it is more efficient to provide services, while on the other, various negative externalities associated with city life, from air pollution and waste, to resource pressures, such as water, will need to be contended with.

One upshot of these changing demographics is a growing shift in consumption habits. Digital penetration is relatively broad among the economies of Southeast Asia (at 67% in in Thailand, 64% in the Philippines and 53% in Vietnam), and people are turning to online channel for shopping. Demands for online goods and services has increased significantly in recent years, with the wider BCG report noting that by last year around 16% of people in Thailand had bought from an online vendor, with similar numbers in Vietnam (14%) and Indonesia (12%).