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AMRO revises down ASEAN+3 growth for 2022 to 3.7 pct

06/10/2022 03:21 PM

KUALA LUMPUR, Oct 6 (Bernama) -- The ASEAN+3 region, which comprises the 10 ASEAN members plus China, Japan and South Korea, is expected to grow by 3.7 per cent this year, according to the ASEAN+3 Macroeconomic Research Office (AMRO).

This is a downward revision from AMRO’s short-term growth forecast of 4.3 per cent made in July, reflecting mainly weaker growth in the Plus-3 countries, said its chief economist Dr Hoe Ee Khor.

The ASEAN region, meanwhile, is expected to grow strongly by 5.3 per cent, he told a virtual media briefing today.

Hoe said the continuing strict dynamic of zero-COVID policy and real estate sector weakness in China as well as potential recessions in the United States and the euro area are weighing on the region’s outlook.

He noted that intensified external headwinds since AMRO’s July 2022 assessment had slowed the region’s growth momentum.

“The downturn in the property sector is a drag on China’s economy. Despite the authorities’ recent measures to prop up the market, new home prices fell to multi-year lows in August, and new construction and land sales contracted further.

“With homeowners halting payments for unbuilt homes and several developers suspending housing projects due to liquidity constraints, the stress in the property sector is already being felt in slowing activity in related sectors like steel and cement manufacturing,” he said.

Outside the region, Hoe said, the prolonged war in Ukraine is deepening Europe’s energy crisis, pushing it closer to recession. In the United States, aggressive monetary tightening to fight persistently high inflation is intensifying fears of a hard landing.

“A simultaneous economic slowdown in the United States and the euro area, in conjunction with tightening global financial conditions, would have negative spillover effects for the region through trade and financial channels,” he said.

The inflation in the ASEAN+3 region for 2022 is now projected to be 6.2 per cent -- a full percentage point higher than previously forecast, with food and fuel prices remaining elevated despite recent easing in key global commodity benchmarks. Subsidy cuts in some economies and depreciating currencies have also pushed prices higher.

Although global oil and food prices have declined from their earlier peaks, inflation is still rising in the region, reflecting a fuller pass-through of high import prices and weaker exchange rates, he said.

“Central banks in the region are raising policy interest rates to safeguard price stability and support their currencies. However, the pace of monetary tightening has generally been more measured and gradual than in the United States and the euro area,” said Hoe.

Nonetheless, he projected the region growth is expected to increase to 4.6 per cent in 2023 although at a slower pace than previously forecast in July at 4.9 per cent as China’s economy picks up and with inflation moderating to about 3.4 per cent.

“The growth outlook for 2023 is dimmer now than what it was in July as the energy crisis in Europe and the US Federal Reserve’s more hawkish stance on inflation are raising the spectre of a global recession.

“Weaker global demand means that exports are likely to slow down, while tighter monetary conditions at home will dampen domestic demand,” he said.

Meanwhile, the ASEAN region’s inflation rate for 2022 is now projected to be 6.2 per cent, a full percentage point higher than previously forecast.

“By contrast, ASEAN’s growth outlook for 2022 is better as reopening has continued apace.

“Widespread lifting of containment measures further facilitated a pick-up in private consumption whereby, the recovery was stronger in the ASEAN economies than in the Plus-3, where it was interrupted by flare-ups in COVID-19 infections,” he added.

Meanwhile, on having a common currency for the region to counter the rising US dollar, Hoe opined that the preconditions such as having one common monetary policy for all countries are not there.

“The countries need to be quite well integrated and the levels of development and people should be quite similar. Otherwise, a lot of pressure on unreasonable monetary policy when an appropriate measure for one country may not be suitable for another country.

“And because of that, we do not see the common currency work for the region any better than that the countries can pursue their independent monetary policy and have their own currencies, as long as the currencies are moving in line with the economic fundamentals and with the business cycle,” he said.

Hoe also viewed that to further strengthen economic and financial cooperation among ASEAN member states, digital greater connectivity in terms of digitalisation in e-commerce and logistic must continue to build.

The digital transformation, he said, had basically helped the region to stay open during the lockdown period, along with increased productivity.

Hence there is a lot of scope for the region to continue to digitalise, but to do that, it should try to harmonise the tax regime, he said.

On logistic connectivity, Hoe said the disability of the integration of the logistic activity is within the payment system area, and there is a suggestion to develop a single window regime using blockchain technology.




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