Manila: Economic growth across the ASEAN+3 region is expected to remain resilient, but policymakers must stay agile to cushion the potential fallout from the ongoing Middle East crisis, according to the ASEAN+3 Macroeconomic Research Office (AMRO).
According to Philippines News Agency, AMRO maintained its growth forecast for the ASEAN+3 bloc-which includes the 10 ASEAN member states plus Japan, South Korea, and China, including Hong Kong-at 4 percent for both 2026 and 2027. Despite the steady regional outlook, growth projections for several economies were revised downward for 2026. Japan's forecast was cut to 0.6 percent from 0.7 percent in April, Cambodia's to 4.2 percent from 4.9 percent, the Philippines' to 4.1 percent from 5.3 percent, and Vietnam's to 7.2 percent from 7.4 percent.
Meanwhile, growth forecasts were upgraded for Hong Kong, from 2.8 percent to 3.4 percent; South Korea, from 1.9 percent to 2.3 percent; Brunei Darussalam, from 1.9 percent to 2.3 percent; and Thailand, from 1.7 percent to 2.1 percent. For 2027, AMRO raised its growth forecasts for Hong Kong to 3 percent from 2.7 percent, South Korea to 2 percent from 1.9 percent, Lao PDR to 4.7 percent from 4.5 percent, and Thailand to 2.5 percent from 2.2 percent.
However, lower growth projections were issued for Brunei Darussalam, at 1.7 percent from 1.9 percent; Cambodia, at 4.9 percent from 5.2 percent; the Philippines, at 5.5 percent from 5.8 percent; Singapore, at 2.9 percent from 3.1 percent; and Vietnam, at 7 percent from 7.1 percent. Inflation across the region is now projected to average 1.8 percent in 2026, higher than the 1.4 percent forecast in April. The 2027 inflation forecast was maintained at 1.5 percent.
Most economies in the region are expected to post higher inflation this year, with Japan as the lone exception. Its inflation forecast was slightly lowered to 2.3 percent from 2.4 percent. For 2027, lower inflation forecasts were issued for China, from 1.2 percent to 1.1 percent; Hong Kong, from 0.9 percent to 0.8 percent; South Korea, from 2.2 percent to 2.1 percent; and Cambodia, from 2.5 percent to 2.4 percent.
AMRO attributed the higher inflation outlook largely to the impact of the Middle East crisis, which has disrupted supply chains and driven up fuel prices, leading to broader increases in commodity costs. The report warned that ASEAN+3 economies 'could face significant stagflationary pressure if the situation in the Middle East worsens.'
'Under an adverse scenario of prolonged high energy and commodity prices, alongside supply disruption, ASEAN+3 growth could be reduced to 2.5 percent and inflation increased to 3.5 percent in 2026,' it said. The scenario assumes Brent crude oil prices average USD125 per barrel this year and disruptions to key industrial output persist.
AMRO Chief Economist Dong He noted that 'against this backdrop, policy responses need to remain agile as the shock evolves.' 'Near-term support should be targeted and temporary, while longer-term efforts should focus on strengthening energy security, supply-chain resilience, and regional integration,' he said.
