AMRO warns inflation may return

AMRO warns inflation may return

AMRO warns inflation may returnThe ASEAN+3 Macroeconomic Research Office (AMRO) projects that the region will record growth of 4.3 percent for 2023, down from an expected 4.6 percent last July, driven mainly by a second-quarter slowdown in China.

The ASEAN+3 group includes ten member countries of the Association of Southeast Asian Nations or ASEAN and China, Hong Kong, Japan, and South Korea.

Through the quarterly update of the ASEAN+3 Regional Economic Prospects (AREO) report, AMRO also expects the region to grow by 4.5 percent in 2024 following the impact of China’s policy support measures in realizing efforts to boost domestic demand.

“Although there are challenges surrounding China’s economic performance, we (on the contrary) need to see things in perspective.

“Beyond the real estate sector, for example, investment in manufacturing is also increasing while consumer spending is back on track. This factor should have a positive spillover effect across the ASEAN+3 region,” said AMRO’s Chief Economist, Khor Hoe Ee.

Meanwhile, inflation in the ASEAN+3 region, excluding Laos and Myanmar, is projected to moderate to 2.6 percent in 2024 compared to this year’s estimate of 2.9 percent.

“However, the reappearance of global food and energy price issues in these few months has only fueled concerns about the rise in other commodity prices, with the risk of increasing inflation becoming more apparent.

“El Nino is a driver of inflation, especially if it leads to additional tighter trade policies on important agricultural imports such as rice,” he said.

For that reason, Hoe Ee also reminded us that the impact of commodity prices on Asean+3 inflation will be more significant if the United States (US) dollar continues to strengthen against the region’s currencies for a longer period.

In addition, AMRO also cautioned against any perceived risk of recession in the US and the euro area, particularly in an environment where global interest rates to remain high for the long term.

“If the recession in both countries becomes a reality, growth in the Asean+3 region could decline below three percent, which is the lowest since 1998 without considering the slowdown due to the COVID-19 pandemic in 2020,” he said.

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