Growth in China and Japan to anchor Asean+3 growth: report

GROWTH in China and Japan will anchor growth in the Asean+3 region, which is expected to slow slightly to around 5.2 per cent in 2017 and further deepen to 5.1 per cent in 2018, according to the inaugural flagship report of the Asean+3 Macroeconomic Research Office (Amro) released on Thursday.

While China and Japan's economic growth is expected to remain stable in 2017, downside risks from rising US trade protectionism loom.

With the uncertain trade outlook, economic growth in the region will continue to be driven primarily by domestic demand, with support from monetary and fiscal policy, said the annual regional surveillance report titled "Asean+3 Regional Economic Outlook".

The report covers macroeconomic outlook for the region and timely thematic issues, thus contributing to the macroeconomic and financial stability of the region supporting the implementation of the Chiang Mai Initiative Multilateralisation Agreement.

Fiscal policy may have to play a greater role to cushion downside risks to the real economy, although fiscal policy space has generally narrowed and, in some economies, is constrained by fiscal rules, it said.

"Foreign exchange reserve buffers in the regional economies remain substantial. Compared to 2016, however, policy room in monetary and fiscal policy has generally narrowed," said the report, which was prepared by a team led by Chuin Hwei Ng under the guidance of Amro director Junhong Chang and Amro chief economist Hoe Ee Khor.

"With constraints on monetary policy, regional policymakers may consider recalibrating targeted macroprudential policy measures to safeguard financial stability and support growth.

"Given the limitations of short-term demand management policies, there is an urgent need for policymakers to accelerate the structural reform agenda," the report said.

The publication, which is a milestone for Amro since it was converted into an international organisation in February 2016, also covers thematic issue on the Asean+3 region 20 years after the Asian financial crisis.