Amro cuts growth forecast for Asean+3 on weakness in China and Japan

Economies of Asean plus China, Japan and South Korea are projected to have grown 3.3 per cent in 2022, lower than the 3.7 per cent estimated in October, the Asean+3 Macroeconomic Research Office (Amro) said on Tuesday (Jan 17).

Amro’s chief economist Khor Hoe Ee said the downward revision for the whole region was mostly due to weaker growth in China-Hong Kong and Japan. 

China’s growth for 2022 was revised lower to 3 per cent, from 3.8 per cent projected in October. Hong Kong is expected to see a negative 2.5 per cent growth in 2022, compared to a 0.3 per cent growth. Japan’s 2022 growth is now expected at 1.4 per cent, instead of 1.6 per cent.  South Korea is the only “plus-3” economy which is expected to see stronger growth. Its 2022 growth is revised up to 2.6 per cent, from 2.4 per cent predicted in October. 

For the Asean economies, however, Amro has revised the 2022 growth rates up to 5.6 per cent, from 5.3 per cent. This will be led by two stellar performers: Malaysia and Vietnam.

Malaysia is expected to expand 8.4 per cent in 2022, making it possibly the highest in the world, with Vietnam expanding 8 per cent, instead of 7 per cent.

Dr Khor said: “Despite the headwinds in the last quarter of last year, Asean has held up very well, supported by strong domestic demand.”

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For 2023, the growth outlook has also been revised downwards due to the “plus-3” economies.

Asean+3 is projected to grow 4.3 per cent in 2023 as China reopens. The “plus-3” economies of China-Hong Kong, Japan and South Korea should expand 4.2 per cent and Asean alone 4.8 per cent.

The weakening global environment has taken the wind out of the sails of the region’s external trade momentum. The drag on economic activity from aggressive monetary policy tightening in the United States and euro area will be felt more fully this year, translating to softer export orders for the Asean+3.

However, the ongoing resumption of tourism, especially with the return of Chinese tourists, will provide a much-needed boost to growth.

“With recession risks still haunting the US and Europe, China’s economic reopening cannot come at a better time for the region,” Dr Khor said, adding that China’s stronger economy will provide support for regional activity while the border reopening will boost intra-regional tourism.

The 2023 inflation forecast for the region is higher than last October due to the inclusion of data for Myanmar, where inflation is forecast to be 14 per cent. Excluding Myanmar, headline inflation for the rest of the region in 2023 remains basically unchanged from last October, at 3.5 per cent. Headline inflation is expected to moderate in 2023 from over 6 per cent in 2022 as global energy and food prices come down.

On whether China alone will be enough to stall a global economic slowdown, Dr Khor believes it will. He predicts China’s gross domestic product for this year to rebound to 5 per cent.

Dr Khor said: “There are a lot of uncertainties over China’s performance this year, but we have taken the optimistic view of a rebound in the second quarter onwards … Our view is this year will be good for the region, with China back and offsetting headwinds coming from the US and Europe.”