Heaptalk, Jakarta — The ASEAN+3 Macroeconomic Research Office (AMRO) has revised the region’s 2022 economic growth forecasts from July 4.3% to 3.7% per October this year, reflecting gloomier prospects for the Plus-3 countries, including China, Japan, and Korea.
According to the study, several factors contributed to this downward prediction, spanning the continuing strict dynamic zero-COVID policy, real estate sector weakness in China, and potential recessions in the United States and the Euro, weighing on the region’s outlook.
As explained by the Chief Economist of AMRO, Hoe Ee Khor, “A simultaneous economic slowdown in the United States and the euro area, in conjunction with tightening global financial conditions, would have negative impacts for the ASEAN+3 region through trade and financial channels.”
During its report, the AMRO team disclosed the prolonged war between Russia and Ukraine is aggravating the energy crisis in Europe and pushing it closer to recession. The aggressive monetary to fight persistently high inflation in the United States has increased the fears of a hard landing -distress about ending an overdemand and inflation period without triggering a recession.
Further, China’s recovery remains constrained by strict COVID-19 containment measures has also generated a weakness in the property sector. Khor perceives this issue as the weaker growth in other advanced economies. Moreover, the recent surge in COVID-19 infections also burdened the economic enhancement in Japan and Korea.
Despite recent decreases around the key global commodity benchmarks, food and fuel prices remain elevated, bringing the ASEAN+3 inflation cases to continue to accelerate. Besides, the subsidy cuts in several economies and depreciating currencies have also pushed prices higher.
AMRO also estimated that the region’s inflation rate for 2022 is projected to reach 6.2% – higher than the previous outcome – due to persistent cost-push factors, a weaker exchange rate, and a more robust recovery in domestic demand, particularly in ASEAN.
“Central regional banks also raise their policy interest rates to safeguard price stability and support their currencies. Yet, the pace of monetary tightening has generally been more measured and gradual than in the United States and the Euro area,” added Khor.
Related to the 2023 forecast, the growth outlook for next year is dimmer than it was in July. The energy crisis in Europe and the US Federal Reserve’s more hawkish stance on inflation are raising the specter of a global recession. A fainter global demand is anticipated to carry a slower export activity as the tighter monetary conditions in the country will lessen the domestic market.
However, AMRO predicts economic growth in the area is expected to increase by 4.6% in 2023 as China recovers. In detail, the Plus-3 countries are projected to enhance by 4.5% and ASEAN by 4.9%, with inflation moderating to about 3.4% next year.
