Soaring energy prices and a stalling US economy have emerged as potential downside risks that could dampen growth in Asean+3 economies, according to the Singapore-based Asean+3 Macroeconomic Research Office (Amro).
According to an Amro report published recently, China's reopening would help support the region's growth this year, but external demand is expected to be pressured by signs of economic slowdown in the US.
Concerns have been raised after recent economic data in the US indicated a weak labour market through private payrolls and job openings. For example, the US Labor Department revealed that initial jobless claims fell to a seasonally adjusted 228,000 for the week ended April 1 compared with expectations of 200,000 claims.
The report noted that the most immediate risk for Asean+3 countries is the possibility of another shock to global energy prices should the ongoing Russia-Ukraine conflict escalate.
Oil prices recently rose due to a decision made by Opec+ to slash over 1 million barrels of daily output starting in May. Saudi Arabia has since hiked prices of all its oil sales to customers in Asia.
Dubai crude was priced at US$84.59 per barrel on April 7, while Brent and West Texas Intermediate were quoted at $85.12 and $80.7 per barrel, respectively.
"A global energy shock in conjunction with a global economic slowdown would be a major blow to the region," said Amro.
This year, the office expects the region as a whole would see an increase of 4.6% growth from 3.2% in 2022, which fell sharply from 6.3% in 2021 following the outbreak of Covid-19 in China.
"Asean+3 could be the main driver for the current global economy. Next year, we expect growth to moderate somewhat to 4.5%. It is a very robust growth, but we have to see what happens next," said Amro chief economist Hoe Ee Khor.
"We have been hit by a few shocks since the release of our forecast such as the Silicon Valley Bank and more recently the cut in Opec's output."
Meanwhile, the banking sector distress in the US and Europe has amplified volatility in the global market, which leaves some implications for some sectors in the region.
"In the region, Singapore or Hong Kong are likely to be affected because of the merger between UBS and Credit Suisse. Because of the large presence of both banks in the region, I think the economy will be affected as well," he said, adding the two banks announced a 30% cut in employment.
"We are living in precarious times. Policymakers need to remain vigilant and continue to rebuild policy buffers. They also need to remain flexible to extend additional support to the economy, if necessary."
