BANGI: ASEAN needs to deepen regional integration and strengthen intra-regional investment to enhance its economic resilience amid growing global uncertainties, including geopolitical tensions and supply chain disruptions, according to ASEAN+3 Macroeconomic Research Office (AMRO) Group head and lead economist Allen Ng.
He said prolonged conflicts, particularly in West Asia could push inflation higher and weigh on growth across the ASEAN+3 region, with the impact largely dependent on the duration and severity of the crisis.
"In a scenario of uncontrolled regional escalation, inflation could rise significantly above baseline levels, while growth may moderate further, therefore there is a need for policy readiness and regional cooperation,” he said during his presentation at the ASEAN+3 Regional Economic Outlook and Fiscal Policy Report Outreach Seminar here today.
Ng was one of the panellists at the 90-minute seminar jointly hosted by Institut Kajian Malaysia dan Antarabangsa (IKMAS) and AMRO.
Ng added that strengthening intra-regional trade and investment linkages had also provided an important buffer against external headwinds, noting that deeper regional integration would be key to sustaining growth momentum.
The economist said while most ASEAN+3 economies retain some fiscal and monetary policy space, policymakers must strike a balance between preserving flexibility in the near term and responding decisively if economic conditions worsen.
"Targeted fiscal support and clear monetary policy communication will be critical to anchor inflation expectations, while longer-term strategies should focus on diversifying energy sources and strengthening supply chain resilience,” he said.
At the same time, he highlighted that low intra-ASEAN investment remains a key structural challenge, limiting deeper trade integration within the region.
"Intra-regional foreign direct investment in ASEAN has remained relatively low and has declined over the past decade, indicating weaker investment integration compared to other regions such as the European Union,” he said.
In addition, he said ASEAN must adopt a more coordinated investment strategy, including easing non-tariff barriers, leveraging global value chain linkages and promoting intra-regional investment to drive productivity and sustainable growth.
"The internationalisation of ASEAN firms would be a key catalyst in advancing the region’s next phase of economic transformation.
"As firms expand beyond domestic markets, they create new investment flows and trade linkages that reinforce regional integration, ultimately strengthening ASEAN’s resilience and reducing reliance on external demand,” he said.
According to AMRO’s analysis, deeper ASEAN integration could significantly boost intra-regional trade, potentially raising its share to nearly 40 per cent by 2050, while creating a more stable and diversified source of growth for the region.
The ASEAN+3 economies, according to him, has entered 2026 from a position of relative strength, underpinned by resilient domestic demand and robust export performance despite earlier external shocks.
The region’s growth had outperformed initial expectations following the April 2025 tariff shock, with expansion reaching about 4.3 per cent in 2025, well above earlier projections.
"This reflects, in part, on lower effective tariff rates and sustained demand for AI-driven semiconductor exports, while private consumption remained firm on the back of favourable labour market conditions and low inflation.”
However, Ng projected growth (across ASEAN+3) to moderate to around 4.0 per cent in 2026 and 2027, as external headwinds weigh on the region despite continued resilience in domestic demand.
Inflation is projected to trend higher, rising from 0.9 per cent in 2025 to about 1.4 per cent in 2026 and 1.5 per cent in 2027, driven largely by energy-related pressures.
At the same time, he said the technology cycle remains a double-edged sword, with strong AI-driven semiconductor demand supporting exports, but with uncertainty over how long the upcycle can be sustained.
On Malaysia, Ng said growth is expected to ease slightly to 4.6 per cent in 2026 before improving to 4.7 per cent in 2027, compared with 5.2 per cent in 2025, while inflation is projected to rise to around 2.0 per cent in both years.
Another AMRO economist Luke Hong said ASEAN+3 needs to navigate mounting structural pressures while remaining agile in responding to external shocks.
He said achieving resilient, inclusive and sustainable growth will require a more comprehensive approach to fiscal policy, anchored on stronger aggregate management, efficient spending and improved revenue mobilisation.
"Member authorities should establish credible fiscal anchors and strengthen fiscal rules to ensure medium- to long-term sustainability, while maintaining sufficient flexibility to respond to evolving economic conditions.
"At the same time, improving spending efficiency especially in key sectors such as infrastructure, health and education will help maximise the impact of public resources and strengthen overall economic resilience,” he said. - Bernama
