THE Asean plus China, Japan and South Korea region – known as Asean+3 – is expected to grow at a “slightly faster pace” of 4.5 per cent in 2024 from 4.3 per cent in 2023, said the Asean+3 Macroeconomic Research Office (Amro) on Monday (Apr 8).

The macroeconomics surveillance organisation attributed the improvement to more robust growth in Asean economies, which it said complemented the “steady” expansion in China, Hong Kong, Japan and South Korea.

Asean is forecast to expand at a rate of 4.8 per cent in 2024, compared to 4.2 per cent in 2023. Such strong growth in South-east Asia is driven by a rebound in merchandise exports, firm domestic demand, as well as the return of tourism to pre-pandemic levels.

Within the Plus-3 subregion, China and South Korea will drive its growth for this year, said Amro in its latest Regional Economic Outlook report for 2024.

A gradual recovery in the property market and improving external demand will bolster growth in China, while South Korea’s economic expansion will be led by greater exports amid a rebound in the global chips cycle.

“The operating environment underpinning the outlook for the region in 2024 and 2025 is expected to be more benign, as the various shocks that have affected the global economy over the past few years begin to subside,” Amro noted.

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Moderating growth in 2025

Asean’s gross domestic product is forecast to maintain its growth in 2025, expanding by 4.9 per cent. Growth in the Plus-3 subregion, meanwhile, is expected to normalise.

As a result, growth in the overarching Asean+3 region is set to moderate in 2025, expanding at 4.2 per cent on the whole, slightly lower than this year.

Despite this, Asean+3 will remain “a major driver of global growth”, contributing about 45 per cent, compared with the pre-pandemic average of 44.5 per cent.

Within Asean specifically, its six major economies will continue to anchor growth. Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam are expected to contribute an average of 10 per cent to global growth between 2024 and 2030.

Amro expects growth in Brunei, Cambodia, Laos and Myanmar to gradually pick up as well, expanding by more than 5 per cent per year. These economies are poised to account for a larger share of the regional and global economy by the end of the next decade, it added.

Lower inflation

Headline inflation in the region is forecast to trend downwards.

Excluding Laos and Myanmar – where inflation is largely driven by persistent currency depreciation – inflation for Asean+3 in 2024 is estimated at 2.5 per cent, down from 2.8 per cent in 2023. Inflation is expected to fall further to 2.3 per cent in 2025.

The low inflation is largely occurring in tandem with the continued stabilisation of global commodity prices, said Amro, although it could remain above the long-term average in some regional economies, as strong domestic demand places upward pressure on prices.

Preparing for rainy days 

Despite the largely blue skies ahead, Amro maintains that the overall balance of risk to Asean+3’s outlook is tilted towards the downside.

“A sudden spike in global commodity prices, weaker-than-expected growth in China, or escalating geopolitical tensions could turn the tide for the region,” said Amro’s chief economist Khor Hoe Ee.

The risk of a sharper-than-expected moderation in the growth of major economies cannot be ruled out as well, Amro warned.

It reiterated that Asean+3’s current sunny growth prospects offer the region’s economies a “timely opportunity to rebuild policy space” as much as they can.

It also called on the region’s economies to cooperate more closely in response to the three key trends of ageing, global trade reconfiguration and rapid technological changes.

“Revitalising growth requires boosting investment and embracing technology to raise productivity and resilience, especially of smaller firms,” said Khor. “Stepping up regional collaboration can be instrumental in achieving this goal.”