ASEAN+3 Macroeconomic Research Office

ASEAN+3 Positioned for Resilience Amid Unprecedented Trade Shocks

The ASEAN+3 region maintained stable growth of 4.3 percent in 2024 despite various uncertainties and is positioned to remain resilient with the policy space to cushion near-term shocks. However, the outlook for the region faces significant headwinds from an unprecedented escalation of tariffs globally.

This year’s report features three chapters: Chapter 1 presents the near-term economic prospects and key risks for the region, including potential impacts of US trade policies; Chapter 2 analyzes post-pandemic inflation dynamics and their policy implications; and Chapter 3 examines the structural factors behind the region’s declining long-term growth potential, outlining five strategic policy priorities to reinvigorate sustainable economic development across the region.

Chapter 1: Macroeconomic Prospects and Challenges

ASEAN+3 delivered a resilient performance in 2024, despite a volatile global environment. Domestic demand remained robust, inflation moderated across the region, and investment continued to flow into key sectors including semiconductors and AI infrastructure. Robust trade and the recovery in regional tourism added further momentum to growth.

The region faces significant headwinds from unprecedented global tariff escalation, creating an unusually wide range of possible outcomes. Nevertheless, ASEAN+3 is positioned for resilience with growth increasingly driven by domestic demand, diversified export markets, and policy space to manage risks.

Looking ahead, ASEAN+3's collective economic resilience provides an important foundation for the region’s outlook in an increasingly fragmented global landscape. By deepening regional integration and policy coordination, regional economies can better withstand external challenges while creating new growth opportunities.

Chapter 2: Inflation in ASEAN+3: Changing Dynamics and Policy Implications

After two decades of low and stable inflation, ASEAN+3 experienced an inflationary surge in 2021 due to the COVID-19 pandemic and multiple global supply shocks. The inflation dynamics evolved significantly, with supply factors becoming more important during 2021-2022 through global commodity prices and supply chain disruptions.

Regional economies successfully managed inflation during this period through combined approaches: monetary tightening anchored expectations and contained demand pressures, while fiscal measures (subsidies, transfers, tax adjustments) protected households. Additional interventions including price regulation, stockpile management, and trade measures ensured essential goods remained affordable.

Looking ahead, structural shifts such as geopolitical tensions, demographic changes, and climate transition may increase supply disruption risks, requiring more forceful responses by monetary authorities and enhanced monitoring to distinguish between supply and demand factors. Building adequate policy buffers and maintaining strong surveillance capabilities will be crucial for effectively navigating these challenges.

Chapter 3: Long-term Growth of ASEAN+3: Prospects and Policies

The ASEAN+3 region, a key global growth driver, has experienced declining growth momentum since the global financial crisis, in part due to slower capital accumulation and sluggish productivity gains from structural change. Long-term growth in some regional economies has been characterized by stalled industrialization and persistent sectoral productivity gaps compared to global frontiers, with many economies having shifted toward lower-productivity services.

The region is facing not only the enormous task of revitalizing economic growth but also ensuring its future pathway is dynamic, inclusive and can respond to new challenges such as rapid aging, climate change, and global trade reconfiguration.

Five policy themes could guide the region’s policymakers to craft new growth pathways for the future: (1) upgrading existing manufacturing capabilities; (2) prioritizing high skills and quality services; (3) closing investment gaps, especially in productivity-enhancing infrastructures; (4) boosting innovation and leveraging on technology; and (5) strengthening state capacity. These insights aim to revitalize the region's economic momentum while ensuring development pathways are inclusive, equitable, and sustainable.