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THE Asean plus China, Japan and South Korea (Asean+3) region is expected to expand at a steady pace of 4.4 per cent this year, said the Asean+3 Macroeconomic Research Office (Amro) on Tuesday (July 16).

The macroeconomic surveillance organisation attributed the sustained growth momentum to resilient private consumption, export growth and a sustained recovery in global travel.

The revival of tourism lifted domestic spending significantly and this – coupled with improving prospects in key export markets – helped bolster business sentiment in recent months, noted Amro in a quarterly update of its flagship outlook report on the 10 Asean member states plus China, Hong Kong, Japan and South Korea.

The updated July prediction of 4.4 per cent gross domestic product growth is marginally lower than April’s estimate of 4.5 per cent.

Said Amro’s chief economist Khor Hoe Ee: “Real estate aside, China’s economy continues to grow robustly. Tourism has rebounded close to pre-pandemic levels for most economies in the region, and the global semiconductor recovery is broadening to benefit more economies and sectors in Asean+3.”

In particular, brighter global demand prospects are reflected in the upward growth revisions for Vietnam – which saw a 0.3 per cent increase to 6.3 per cent – and South Korea – whose growth estimate rose to 2.5 per cent from 2.3 per cent, said Amro.

These increments helped offset Japan’s half-percentage-point cut. Compared with projected growth of 1.1 per cent in April, Japan is now expected to expand by 0.5 per cent this year, in line with slashed forecasts across the board.

Dr Khor explained in a virtual press briefing that the country has had a “very weak” first half of the year that was bogged down by sluggish consumption.

“But we do expect the economy to begin to recover and strengthen,” he continued, pointing out Amro’s growth forecast of 1.4 per cent for Japan next year.

Growth estimates for 2025 were broadly maintained as well.

Amro expects growth across the Asean+3 region to ease to 4.3 per cent next year, marginally higher than April’s estimate of 4.2 per cent, as regional economies converge to their trend growth.

This comes as the global economy continues to stabilise and monetary easing in major economies resume, said Amro.

“The recovery in China is also anticipated to normalise next year, with the help of targeted policy interventions to steer the property sector into a more sustainable growth trajectory,” the report said. “Tourist volumes should be back to pre-pandemic levels by next year for most economies, alongside a stronger pick up in manufacturing exports.”

Inflationary pressures subside

Inflation this year is anticipated to ease to 2.1 per cent from April’s projection of 2.5 per cent, on the back of softer-than-expected food prices in several economies and lower imported inflation, said Amro.

This is excluding Laos and Myanmar, where inflation is largely driven by persistent currency depreciation.

While inflation for the 12 economies is expected to trend upwards to 2.3 per cent next year as economic momentum gains traction, higher cost pressures are unlikely to trigger a large spike in inflation, noted Amro.

That said, the macroeconomic surveillance organisation maintains that downside risks remain, particularly if geopolitical tensions escalate and trigger global commodity and shipping price hikes.

Brighter skies ahead

The overall risk landscape assessment for the region improved since April, said Amro, who earlier maintained that the overall balance of risk to Asean+3’s outlook is tilted towards the downside.

Potential trigger factors – such as price shocks, weaker-than-expected growth in China and sharp growth slowdowns in the US and Europe – remain broadly the same, but their underlying risks to growth and inflation receded, added Amro.

“The bad news is that the region’s outlook next year could be significantly affected by the outcome of the US elections,” said Dr Khor. “The good news is, the region has weathered similar shocks before.”

He concluded: “Our economies need to keep rebuilding policy space and pursue policies to enhance resilience to shocks.”