
The ASEAN+3 region—comprising ten member states of the Association of Southeast Asian Nations, China, Japan and South Korea—is set to remain resilient with a steady growth rate of 4.2 per cent this year, according to the January update of the regional economic outlook by the ASEAN+3 Macroeconomic Research Office (AMRO).
This expansion is driven by domestic demand as private consumption across most ASEAN+3 economies remains robust, supported by favourable employment conditions and easing inflation.
This expansion is driven by domestic demand as private consumption across most ASEAN+3 economies remains robust, backed by favourable employment conditions and easing inflation.
However, uncertainties to the outlook loom large.
At the same time, improving external demand, particularly in the technology sector, will continue to lift growth, a release from AMRO said.
Meanwhile, inflation for the region, excluding Laos and Myanmar, is projected to remain low at 2.1 per cent this year—a slight uptick from 1.7 per cent in 2024 due to improving domestic demand and supply-side adjustments.
However, uncertainties to the outlook loom large. Slower growth in the United States, Europe or China could dampen exports, while potential spikes in global commodity prices due to extreme weather or geopolitical tensions could restoke inflation.
The most immediate concern, however, is potential policy shifts under the new US administration. As a major trade partner, the US’s policy changes, including import tariffs, fiscal expansion, and immigration reforms, will affect ASEAN+3 economies, AMRO noted.
Among the potential shifts, the new administration’s proposed tariffs aimed at reducing the US trade deficit and protecting domestic industries present the most prominent risk.
Higher tariffs on key US import sources, such as China, risk reigniting inflationary pressures in the United States and dampening domestic demand, which could, in turn, weaken global demand as the US is a major final consumer globally.
Retaliatory measures by affected economies would exacerbate global demand weakness. Under a scenario of 60 per cent tariff by the US on Chinese imports and 10 per cent tariff for all other economies, with in-kind retaliation from affected countries, regional growth could be lower by 1-2 percentage points over the next two years, resulting in the lowest regional growth since the Asian Financial Crisis, AMRO observed.
If US inflation resurges, monetary policy is likely to be tightened, leading to a stronger dollar and tighter global financial conditions. For ASEAN+3 economies, these dynamics could trigger capital outflows and exchange rate depreciations, and possibly higher policy rates and overall tighter financial conditions that would further weigh on growth.
Despite these challenges, the ASEAN+3 region remains resilient, underpinned by sound fundamentals and robust domestic demand, AMRO added.
Fibre2Fashion News Desk (DS)