The ASEAN+3 Macroeconomic Research Office (AMRO) on Monday revised upward its economic growth forecast for the ASEAN+3 region amid the renewed escalation in the Middle East.

In its July 2026 ASEAN+3 Regional Economic Update, AMRO projected the region to grow by 4.1 percent, up from its 4 percent forecast in June.

The ASEAN+3 bloc includes the 11 Southeast Asian member-states, plus Japan, South Korea and China, and including Hong Kong.

“Growth is revised upward to 4.1 percent in 2026, and maintained at 4 percent in 2027 as robust AI (artificial intelligence)-driven demand offset headwinds from the Middle East conflict,” AMRO head and lead economist Allen Ng said in a briefing.

Ng said ASEAN+3 currently accounts for about half of the world’s AI-related trade.

“Stronger-than-expected AI-related demand is supporting growth and lifting the outlook for regional economies, especially those with strong global supply linkages,” he said.

Household spending also remained firm, supported by favorable labor market conditions and continued income growth particularly in ASEAN economies, and tourism provided further support to export growth, led by the return of Chinese travelers.

Cambodia’s forecast was maintained at 4.2 percent, Indonesia at 5 percent, Lao PDR at 4.6 percent, Myanmar at 2.5 percent, China at 4.5 percent; Hong Kong at 3.4 percent; Japan at 0.6 percent; and the Philippines at 4.1 percent.

AMRO chief economist Dong He, during the same briefing, said the Philippines is one of the countries in the region hit hardest by the oil price shock.

Moving forward however, He said the Philippines will continue to benefit from AI.

“Actually, the Philippines, even though we typically think that the Philippines is very much a service-based export economy, it is very much plugged into the global AI cycle as well. They are very involved in the semiconductor exports, so that would continue to provide support to the export growth in the Philippines,” He said.

Upgraded

Meanwhile, growth forecasts were upgraded for Korea from 2.4 percent to 3.1 percent; Malaysia, from 4.6 percent to 4.9 percent; Singapore, from 3.4 percent to 4.8 percent; Thailand, from 2.1 percent to 2.4 percent; and Vietnam, from 7.2 percent to 7.5 percent.

The growth outlook for Brunei was cut to 1.9 percent from 2.3 percent.

For 2027, AMRO revised upward the growth forecast of Korea from 2 percent to 2.2 percent, Singapore to 3.1 percent from 2.9 percent, and Vietnam to 7.3 percent from 7.2 percent.

The projection for other countries was maintained at 4.5 percent for China, 3 percent for Hong Kong, 0.8 percent for Japan, 1.7 percent for Brunei, 4.9 percent for Cambodia, 5.1 percent for Indonesia, 4.7 percent for both Lao PDR and Malaysia, 2.5 percent for Myanmar and Thailand, and 5.5 percent for the Philippines.

AMRO said inflationary pressures remained broadly contained.

Inflation across the region is forecast to average 1.6 percent in 2026, down from the 1.8 percent projection in June due to the assumption of lower global commodity prices.

Lower inflation forecasts were issued for China at 0.8 percent form 1 percent; Japan at 2.1 percent from 2.3 percent; Brunei to 0.7 percent from 1.2 percent; Lao PDR to 8.1 percent from 9 percent; Myanmar at 20 percent from 24 percent; Philippines at 5.7 percent from 6 percent; Singapore at 2.1 percent from 2.5 percent; Thailand at 1.4 percent from 2.9 percent; and Vietnam at 4.3 percent from 4.4 percent.

Central bank policy

In the case of the Philippines, He said lower oil prices contributed to the downward revision in the inflation forecast.

He said the central bank acted very swiftly in tightening monetary policy, which helped contain the broader pressures.

“And indeed, because oil prices now, we assume in the baseline, are lower level, so we would expect that overall inflation in 2026 for the Philippines would be slightly lower than we thought would be the case back in June,” He said.

Meanwhile, inflation projections for Malaysia and Indonesia were maintained at 2 percent and 3.4 percent while Cambodia’s was revised upward to 5.1 percent from 4.5 percent.

For 2027, inflation in the region is expected to average 1.6 percent.

AMRO noted that the growth outlook remains subject to uncertainty, adding that risks stem from the evolving Middle East conflict and the durability of the AI-driven technology cycle.

“Renewed escalation in the Middle East could push energy and shipping costs back up, prolong shortages of key industrial inputs, and add to food price pressures,” it added. (PNA)