The Asean+3 region is forecast to grow at 4.5% this year, up from 4.3% in 2023, and expand by 4.2% in 2025, mainly driven by robust domestic demand, underpinned by increasing household incomes and recovering investment activity, according to a recent report.
And an anticipated turnaround in exports, in part due to the global chips upcycle, and the continued recovery of tourism, will provide additional tailwinds, notes the Asean+3 Regional Economic Outlook (AREO) 2024 report, published by the Asean+3 Macroeconomic Research Office (AMRO).
The smaller Association of Southeast Asian Nations (Asean) region is expected to benefit from a combination of these favourable factors, the report shares, with growth in 2024 and 2025 forecast at 4.8% and 4.9%, respectively, while growth in the Plus-3 region (China, Japan and South Korea) is expected to remain robust at 4.3% and 4.1%, respectively.
With global commodity prices continuing to stabilize, inflation in Asean+3 – excluding Laos and Myanmar – is expected to moderate from 2.8% last year to 2.5% in 2024, before easing further to 2.3% in 2025.
Nevertheless, the AREO report warns against taking the region’s positive momentum for granted in light of potential disruptors to the growth trajectory.
“A sudden spike in global commodity prices, weaker-than-expected growth in China, or escalating geopolitical tensions could turn the tide for the region,” says Hoe Ee Khor, AMRO chief economist. “Now that the current outlook is quite positive, given robust growth and gradual disinflation, Asean+3 economies need to rebuild policy space as much as they can.”
It has been nearly a year since the World Health Organization declared an end to the Covid-19 pandemic, and the Asean+3 region continues to grapple with pandemic scars. The global health crisis, the report shares, has taken a toll not only on economic activity, but also on the labour force and capital formation, especially infrastructure. Trend growth for most regional economies has remained lower than the pre-pandemic period, and the recovery in capital formation has been particularly weak.
“Revitalizing growth requires boosting investment and embracing technology to raise productivity and resilience, especially of smaller firms,” Khor adds. “Stepping up regional collaboration can be instrumental in achieving this goal.”
Asean+3 economies should, the report suggests, work more closely together in response to three key secular trends: aging, global trade reconfiguration and rapid technological changes.
While these structural shifts pose various risks, the AMRO suggests, they should also create new sources of growth and productivity gains. And, in addition to balancing the risks with the opportunities that the shifts offer, they will help Asean+3 secure sustainable, resilient and inclusive growth in the long term.
“Ageing presents a critical challenge for the Asean+3 region,” notes Allen Ng, AMRO group head and one of the report’s authors. “At the same time, it’s important to recognize that the region is not just ageing. We are also living longer and healthier. Adapting to this ‘longevity dividend’ and enabling our populations to age productively will be crucial for the region’s future.”
Similarly, while the ongoing trade reconfiguration is casting concerns about the region’s time-tested export strategies, it is also, the report adds, creating new opportunities. One example is the spike in foreign direct investment inflows into several Asean economies and strong growth in Asean+3’s exports of “modern” services, especially those that can be delivered digitally.
However, concerns are rising, AMRO points out, about technology’s potential impact on the future of industries and jobs in Asean+3, especially with the rapid progress in artificial intelligence (AI) technologies like generative AI.
“Navigating these cross-currents requires prioritizing robust policies to secure growth under various possible futures,” Ng adds. “For Asean+3, this includes deepening infrastructure development as well as promoting innovation and social inclusion.”
