Asean+3 growth holds at 4.1pct despite energy shock

Asean+3 economies are projected to grow 4.1 per cent in both 2026 and 2027, despite the impact of the Middle East energy shock, according to the Asean+3 Macroeconomic Research Office (AMRO).

In its Asean+3 Regional Economic Outlook (AREO) October Update released today, AMRO said the 2026 growth forecast was unchanged from July, while the 2027 projection was raised by 0.1 percentage point, supported by stronger artificial intelligence (AI)-related exports and investment.

Inflation is projected at 1.6 per cent in 2026 and 1.7 per cent in 2027.

AMRO said the 2027 inflation forecast was also raised by 0.1 percentage point, reflecting higher energy costs and El Niño-related food price pressures.

AMRO chief economist Dong He said the AI investment cycle was supporting a widening range of regional activities, although domestic demand remained uneven.

"Disruptions to energy supplies and industrial inputs proved less severe than many had feared, limiting the drag on production. However, higher energy and logistics costs continued to weigh on household purchasing power and business costs," he said.

AMRO said the global macro-financial environment had been shaped by optimism over AI and geopolitical tensions arising from the Middle East conflict.

Shipping disruptions in the Strait of Hormuz pushed up energy prices and revived global inflation concerns.

Despite external headwinds and rising US dollar interest rates, Asean+3 economies have remained resilient, with market adjustments orderly but varying across jurisdictions based on their exposure to external shocks, domestic fundamentals and policy responses.

It said Asean+3 financial conditions had also become less synchronised with the global financial cycle, even as global shocks continued to affect regional markets during periods of acute stress.

Most regional economies retain sound external positions and adequate foreign exchange reserves, while the banking system remains well-capitalised, liquid and profitable.

Corporate and household debt-to-GDP ratios have generally declined, while public debt-to-GDP has broadly stabilised. However, AMRO said pockets of domestic vulnerabilities warranted continued vigilance.

Looking ahead, the growth outlook is particularly sensitive to AI-related demand, which could strengthen or weaken exports and investment.

Other downside risks include renewed Middle East energy disruptions, a more persistent El Niño, financial market volatility and further protectionist measures.

AMRO said financial stability risks in the region were becoming increasingly complex and interconnected.

A sharp repricing of AI-related assets could trigger broader market corrections, forced deleveraging and tighter credit conditions, while abrupt movements in the US dollar could transmit quickly to Asean+3 economies through exchange rates, capital flows, asset prices and funding costs.

The growth of non-bank financial institutions (NBFIs) can broaden and diversify financing sources, but rising leverage, liquidity mismatches and interconnectedness with banks and financial markets could amplify stress, it said.

Digital finance also presents additional challenges, including risks from foreign currency-denominated stablecoins, cyberattacks and digital fraud.

AMRO said the region should maintain robust macro-financial buffers through credible policy frameworks, adequate foreign exchange reserves and deeper local currency markets to mitigate these vulnerabilities.

Surveillance should adopt a system-wide perspective encompassing NBFIs and cross-sector interlinkages, while integrating digital finance risks and operational resilience against cyberattacks and fraud.

Dong said regional integration itself was a source of resilience, with stronger policy dialogue and cooperation and deeper financial linkages helping Asean+3 economies withstand external shocks and prepare for future risks.

AMRO said regional cooperation must keep pace with the shifting global environment by upgrading information sharing, crisis preparedness and operationally ready financial safety nets.

Advancing regional financial integration, particularly through carefully designed digital connectivity, would help mobilise the region's savings, diversify financing sources and enhance cross-border risk-sharing.

AMRO Group head for financial surveillance Runchana Pongsaparn said technology alone could not deliver meaningful financial market integration, but digital financial platforms could facilitate the process by easing market access, strengthening regulatory compliance and improving efficiency.

Source: NST