KUALA LUMPUR: The Asean+3 gross domestic product (GDP) is expected to grow at 4.7 per cent this year and 4.6 per cent in 2023, said Asean+3 Macroeconomic Research Office (AMRO).
The growth outlook is underpinned by the region's high vaccination rates, which should help mitigate the health risks of Covid-19, AMRO said, based on its annual report - the ASEAN+3 Regional Economic Outlook (AREO) 2022.
While the region's growth is expected to normaliae as the pandemic recedes, the outlook is clouded by new and legacy risks.
AMRO chief economist Hoe Ee Khor said that since the outbreak of Covid-19 two years ago, the region's economies have been waging war against the virus to control their economies while protecting the health of their populations.
"Now, as we move through 2022, the region may have finally gained some ground in its long battle against the virus and can look forward to a fuller opening-up and a strong economic recovery," Hoe said in a statement.
According to AMRO, the war in Ukraine is an emerging risk to the outlook as its effects are already being felt in the region through higher energy prices.
While ASEAN+3 economies have limited direct exposure to Russia and Ukraine, they will not remain unscathed if the war drags on, the firm said.
The economic fallout—disrupted global supply chains, higher global inflation, and slower global growth—would undoubtedly hurt ASEAN+3 exports and growth.
Soaring inflation in the United States (US) has prompted the Federal Reserve to tighten monetary policy, but uncertainty remains as to how aggressive its approach will be.
AMRO said a sharper-than-expected rate hike by the Fed and consequent tightening in global financial conditions would have implications for the region's interest rates, capital outflows, and financial market volatility.
"Within ASEAN+3, financial risks are still elevated in many economies due to the pandemic.
"Macro-financial policies continue to be focused on alleviating the pandemic's impact on households and firms and supporting an economic recovery.
"If the recovery is delayed, more businesses and individuals could come under financial stress," it said.
Given the less supportive global policy settings in 2022, AMRO said the region's policymakers would have to undertake a crucial balancing act—avoiding a premature withdrawal of policy support to sustain the recovery.
"ASEAN+3 policymakers will have to be nimble as they navigate this complex environment, strengthen economic recovery, and rebuild policy space.
"This will not be our last crisis. We must rebuild and continuously innovate and learn as we prepare for the next crisis," said Hoe.