AMRO "Vietnam's Growth Rate 6.5% This Year... Highest Among ASEAN"

ASEAN+3 Regional Outlook Report Released
Philippines at 6.3%, ASEAN Overall at 4.7%
China at 4.8% Despite Trade War, Japan at 1.3%
Fiscal Buffer Needed to Respond to the U.S.
"Monetary Policy Should Consider Financial and External Stability"

Among ASEAN (Association of Southeast Asian Nations) + 3 countries (South Korea, China, Japan), the countries expected to have the highest growth rates this year are Vietnam (6.5%) and the Philippines (6.3%). Despite the trade war with the United States, China is projected to record a growth rate of 4.8%, similar to last year's 5.0%. South Korea is expected to grow by 1.6%, below its potential growth rate (around 2.0%) but higher than Japan's 1.3%.

The macroeconomic research organization AMRO (ASEAN+3 Macroeconomic Research Office) released this forecast in its 2023 ASEAN+3 Regional Economic Outlook (AREO) report on the 15th. AMRO is an international organization that supports economic and financial stability among its member countries, which include the 10 ASEAN countries, South Korea, Japan, and China. Every year, it publishes this report to review the overall economic trends of these countries and recommend necessary policies.

AMRO forecasted that the ASEAN+3 region's growth will slow down from 4.3% last year to 4.2% this year and 4.1% next year due to the strengthening of U.S. protectionist trade policies. However, it expects the region to maintain a stable growth rate in the 4% range, supported by robust domestic consumption, investment, and improved external demand in sectors such as semiconductors and tourism. Inflation in the region is projected to be 1.9% this year.

ASEAN as a whole is expected to record a growth rate of 4.7% this year, outpacing the combined growth of South Korea, China, and Japan (4.1%). The growth rate forecasts for ASEAN countries this year are as follows: Vietnam (6.5%), the Philippines (6.3%), Cambodia (5.8%), Indonesia (5.0%), Malaysia (4.7%), and Laos (4.6%). Singapore, as a global hub for electronic supply chains, is sensitive to the semiconductor industry. Due to the base effect from the semiconductor downturn in 2023, Singapore recorded a high growth rate of 4.4% last year but is expected to normalize to 2.7% this year and 2.4% next year.

Japan's growth rate forecast for this year is 1.3%, lower than South Korea's 1.6%. AMRO noted that Japan's growth rate was only 0.1% last year but expects it to maintain growth in the 1% range this year and next year (1.0%). China's growth rate is expected to slightly slow from 5.0% last year to 4.8% this year and 4.7% next year despite ongoing tensions with the United States.

Regarding inflation forecasts, Myanmar, which is in the midst of a civil war, is expected to continue suffering from severe inflation. AMRO projects Myanmar's inflation rate to remain high at 25.0% this year, down slightly from 27.5% last year, and to ease to 18.0% next year. Laos is struggling with large-scale debt issues due to its participation in China's Belt and Road Initiative, with inflation expected to decrease from 23.1% last year to 10.1% this year and 6.4% next year.

China's inflation rate is forecasted to rise from 0.2% last year to 1.1% this year and 1.3% next year. While this suggests some relief from last year's deflation concerns, the inflation rate remains low in the 1% range, which may be insufficient to fully dispel deflation fears. Japan's inflation rate is expected to remain in the 2% range, recording 2.7% last year, 2.5% this year, and 2.1% next year. With the Bank of Japan (BOJ) planning to raise its benchmark interest rate and wages on the rise, expectations for escaping deflation are increasing.

AMRO pointed out that downside risks dominate the outlook for the ASEAN+3 region. In particular, it highlighted that the strengthening of U.S. protectionist trade policies could slow regional growth through global trade channels. Other short-term downside factors include tightening global financial conditions, slowing growth in major economies, and sharp rises in commodity prices. In the long term, population aging, climate change, and technological shocks were identified as key challenges.

To respond to these challenges, AMRO emphasized the need for fiscal policies that maintain short-term economic responsiveness while securing long-term fiscal buffer capacity. Monetary policy should be carefully adjusted in terms of timing and magnitude according to each country's circumstances, while considering financial and external stability.

An official from the Ministry of Economy and Finance explained, "Overall, the figures are consistent with the previous annual consultation results," adding, "It is difficult to immediately reflect recent U.S. tariff impacts, and since the situation changes frequently, not all factors were included in this announcement."