Optimistic outlook for economic growth of ASEAN+3

The ASEAN+3 Macroeconomic Research Office (AMRO) on April 12 published its annual ASEAN+3 Regional Economic Outlook (AREO) 2022 which forecasts the region’s growth at 4.7 percent this year and 4.6 percent in 2023, with growth for ASEAN at 5.1 and 5.2 percent, respectively.

The growth outlook is underpinned by the region’s high vaccination rates, which should help mitigate the health risks of COVID-19, the report said.

Economists said that within ASEAN+3, financial risks are still elevated in many economies due to the pandemic. Macro-financial policies continue to focuse on alleviating the pandemic’s impact on households and firms and supporting an economic recovery. If the recovery is delayed, more businesses and individuals could come under financial stress.

According to the report, the war in Ukraine is an emerging risk to the outlook. Its effects are already being felt in the region through higher energy prices. While ASEAN+3 economies have limited direct exposure to Russia and Ukraine, they will not remain unscathed if the war drags on. The economic fallout - disrupted global supply chains, higher global inflation, and lower global growth - would undoubtedly hurt ASEAN+3 exports and growth.

In addition, soaring inflation in the United States has prompted the US Federal Reserve to begin tightening monetary policy, but uncertainty remains as to how aggressive its approach will be.

Given the less supportive global policy settings in 2022, the region’s policymakers will have to undertake a crucial balancing act, avoiding a premature withdrawal of policy support to sustain the recovery, while at the same time facilitating the reallocation of capital and labour to new and expanding sectors and restoring policy space to prepare for future risks, said AMRO Chief Economist, Dr. Hoe Ee Khor.