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Asean+3 expected to grow at 4.5%, Asean tipped to expand at 4.8% in 2024: AMRO

Felicia Tan
Felicia Tan • 4 min read
Asean+3 expected to grow at 4.5%, Asean tipped to expand at 4.8% in 2024: AMRO
The higher expansion is mainly due to the robust domestic demand from higher household incomes and recovering investment activity. Photo: Bloomberg
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The Asean+3 region – which includes China, Hong Kong (China), Japan and Korea – is expected to grow at 4.5% in 2024, up from the 4.3% reading in 2023, says the Asean+3 Macroeconomic Research Office (AMRO) in a report released on April 8. The higher expansion is mainly due to the robust domestic demand from higher household incomes and recovering investment activity.

In addition, exports are expected to see a turnaround due partly to the global upcycle in chips and the continued recovery of tourism.

The Asean region itself is tipped to expand by 4.8% in 2024 as it is poised to benefit from these factors. At the same time, growth in the “Plus-3” region is expected to remain “robust” at 4.3% in 2024.

In 2025, Asean+3 is expected to moderate slightly to 4.2% while the core Asean region is tipped to grow by 4.9%. China, Hong Kong, Japan and Korea is expected to grow by 4.1% in 2025.

“Growth momentum is expected to remain favourable in 2024 and 2025, with domestic demand remaining resilient and exports forecast to turnaround, benefitting mainly from the semiconductor upcycle, a pickup in retail spending on durable goods, and continued recovery in tourism,” says Khor Hoe Ee, chief economist of AMRO.

“Robust growth in China is also expected to generate positive spillovers for the region. Yet, as the report underscores, the region’s promising economic trajectory should not be taken for granted,” he adds.

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On the back of stabilising global commodity prices, inflation in Asean+3, excluding Laos (or Lao People’s Democratic Republic) and Myanmar, is expected to moderate to 2.5% in 2024 before easing to 2.3% in 2025. This is down from the 2.8% reported in 2023.

However, the region’s positive momentum should not be taken for granted due to the potential disruptors to its growth trajectory, warns AMRO.

“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 Khor. “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.”

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Though the World Health Organisation (WHO) declared an end to the Covid-19 pandemic in 2023, with all Asean+3 economies fully reopening by the middle of the year, the region continues to “grapple” with the scars from the pandemic.

According to AMRO, the pandemic had taken a toll on economic activity but also on the labour force and capital formation such as infrastructure, in particular.

“Trend growth for most regional economies has remained lower than the pre-pandemic period, and the recovery in capital formation has been particularly weak,” says AMRO. Khor notes that boosting growth requires more investments and embracing technology to “raise productivity and resilience” especially for smaller firms.

“Stepping up regional collaboration can be instrumental in achieving this goal,” he adds.

To this end, AMRO has asked for all economies within Asean+3 to work more closely together to combat ageing, global trade reconfiguration and rapid technological changes.

“Ageing presents a critical challenge for the Asean+3 region,” says Allen Ng, AMRO group head and one of the lead authors of the Asean+3 regional economic outlook 2024 (AREO) report. “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,” he adds.

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The ongoing trade reconfiguration can create new opportunities for Asean+3 even though it is casting concerns over the region’s time-tested export strategies, notes AMRO, citing the spike in foreign direct investments (FDIs) into several Asean economies as one example.

The rapid changes in technology are also contributing to concerns about the future of jobs and industries within Asean+3, especially with the rapid progress in the advancement of artificial intelligence (AI).

“Navigating these crosscurrents requires prioritizing robust policies to secure growth under various possible futures. For Asean+3, this includes deepening infrastructure development as well as promoting innovation and social inclusion,” continues Ng.

In his foreword, Khor notes that many of the economies within the region are “equipped” to transform the risks associated with geoeconomic fragmentation and ageing into growth opportunities.

However, capturing these gains is not guaranteed, as policies need to be pragmatic and forward-looking, as well as centred on developing quality infrastructure, promoting innovation, and embracing inclusivity.

“Our operating economic landscape has become highly challenging and uncertain. Deepening divisions and mounting structural headwinds are casting a shadow over the region’s growth prospects. Strengthening regional cooperation to safeguard collective action would therefore reignite the spark to allow Asean+3 to continue being a bright spot in a global economy that is increasingly challenging to navigate in,” he concludes.

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