"The recovery of ASEAN+3 now depends on strong demand in the region," chief economist of AMRO Hoe Ee Khor noted in a press conference titled "Quarterly Update of AREO 2023" monitored online in Jakarta on Tuesday.
Although the ongoing weakness in global trade has prompted a slight reduction in ASEAN's growth forecast in 2023 to 4.5 percent, from April's projection of 4.9 percent, he remarked that this would be offset by an improved outlook for the Plus-3 economies: Japan, South Korea, and China.
Recovery in the labor market and reduced inflation, coupled with growing intra-regional tourism, are helping to protect growth against sluggish external demand that is dampening the region's exports.
Meanwhile, inflation has slowed in most ASEAN+3 economies due to the easing of global commodity prices and supply chain normalization that allowed several central banks in the region to halt to reduce the pace of monetary tightening, which in turn will strengthen consumption.
AMRO revised its inflation forecast in 2023 for the ASEAN+3 region, excluding Laos and Myanmar, to three percent, slightly lower than the earlier forecast of 3.4 percent.
For the next year, Khor affirmed that economic growth is expected to decline slightly to 4.5 percent, while inflation is projected to slow further to 2.4 percent.
Without any new surprises, the ASEAN+3 region's export performance will change its direction soon. The turnaround in the global semiconductor cycle, which is likely to start later this year, will become a bright spot for several exporters in the region.
Pent-up demand from returning Chinese tourists will also provide additional boost to the growth. AMRO, however, gives a warning about some lingering risks going forward.
He revealed that one of these risks is the threat of a recession in the United States and Europe. While the current possibility is lower than three months ago, the potential for a recession in the two regions cannot be ignored completely.
“The downside risks to the prospects for the ASEAN+3 region have indeed reduced since April, but we are not out of predicament yet. Rising financial pressure due to tighter US monetary policy is a risk that ASEAN+3 policy makers must continue to watch out for," he warned.
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Translator: Agatha Olivia Victoria, Cindy Frishanti Octavia
Editor: Rahmad Nasution
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