SINGAPORE, July 5, 2022 – The ASEAN+3 Macroeconomic Research Office (AMRO) today shaved down its short-term growth forecast for the ASEAN+3 region, reflecting the impact of the recent COVID-19 outbreak in China and stronger headwinds arising from the war in Ukraine and tighter global financial conditions.
In its July quarterly update, AMRO forecast that the ASEAN+3 region will grow by 4.3 percent this year, slightly lower than its previous forecast. AMRO raised its 2022 inflation forecast for the region to 5.2 percent, up by 1.7 percentage points from April. Growth is expected to strengthen to 4.9 percent in 2023, while inflation is projected to moderate to 2.8 percent.
“Just as the ASEAN+3 region is starting to emerge from the COVID-19 health crisis, the protracted war in Ukraine and persistent inflation in the United States have ushered in a new set of challenges for policymakers,” said AMRO Chief Economist, Hoe Ee Khor.
Five months since it started, the war in Ukraine is set to persist. In addition to exacerbating global supply chain woes, the war and sanctions on Russia have led to higher global prices for fuel and food, causing inflation to accelerate across ASEAN+3.
In the United States, surging prices have caused the Federal Reserve to tighten monetary policy at a faster pace than expected, which has raised concerns of an imminent recession. Financial markets have sold off and risk aversion has spiked, leading to capital outflows from emerging markets.
The recent COVID-19 outbreak in Shanghai had led to lockdowns and disrupted production and supplies in the region. Accordingly, growth for the whole year (2022) has been shaved down for China and the region.
“Navigating this formidable environment, ASEAN+3 policymakers are now facing difficult policy trade-offs as they balance the need to sustain the growth momentum while containing the inflationary pressure,” Khor added.
AMRO noted that more ASEAN+3 economies are shifting to treating COVID-19 as endemic. The further easing of containment measures and travel restrictions should allow for a fuller resumption of economic activity and help boost domestic demand. As a result, growth, especially in the ASEAN region, is expected to remain robust this year and the next.
The ASEAN+3 Macroeconomic Research Office (AMRO) is an international organization established to contribute towards securing macroeconomic and financial stability of the ASEAN+3 region, comprising 10 members of the Association of Southeast Asian Nations (ASEAN) and China; Hong Kong, China; Japan; and Korea. AMRO’s mandate is to conduct macroeconomic surveillance, support the implementation of the regional financial arrangement, the Chiang Mai Initiative Multilateralisation (CMIM), and provide technical assistance to the members.