Slower growth and persistent challenges: ASEAN+3 Regional Economic Outlook, July 2025
- Eco News
- 7 days ago
- 3 min read
ASEAN+3, comprising ten ASEAN countries plus China, Japan and South Korea, is experiencing a period of moderate economic slowdown, driven by increased trade tensions, global slowdowns and volatile geopolitical factors.
The latest regional economic outlook update published in July 2025 by the ASEAN+3 Macroeconomic Research Office (AMRO) paints a mixed picture, with resilience persisting despite growing uncertainty.
More moderate but sustained growth
The region's economy is expected to grow by 3.8% in 2025, slightly below previous forecasts, continuing at 3.6% in 2026. This downward revision is largely due to the implementation of increased US tariffs, scheduled for early August, which are likely to dampen external demand, undermine investor confidence and erode consumer sentiment.
Despite this environment, private consumption is showing rare resilience, bolstered by favourable labour markets and effective inflation control.
Against this backdrop, China, the group's economic engine, is still growing strongly at over 5% in the first half of 2025, thanks to accommodative domestic policy, including an expanded retail programme and targeted infrastructure and financial support measures.
However, the continued weakness of the real estate sector remains a challenge for medium-term economic vitality.
Contained inflation and increased vigilance
Inflation in the region remains under control, with a moderate rate of around 1% expected for 2025 and 2026. Although a temporary spike in oil prices linked to tensions in the Middle East caused a temporary peak, underlying inflationary pressures remain limited.
Moderate commodity prices and the global slowdown in demand are contributing to this easing, while monetary policies adopted in several countries have helped to limit any lasting deviation.
Trade and exports under pressure
Regional exports peaked in the second quarter of 2025, following anticipation of tariff increases by companies that accelerated their shipments. However, this growth is being tempered by a sharp decline in demand from the United States, the main trading partner, and a slowdown in new orders in the manufacturing sector.
It should be noted that the semiconductor sector, a key driver of regional manufacturing, continues to grow but at a slower pace, driven by demand for artificial intelligence and cloud infrastructure.
Tourism, an important pillar of export services, is showing signs of slowing, particularly in the ASEAN-5 economies, where Chinese and European tourist arrivals are declining after a post-pandemic rebound.
While the recovery remains intact in the Plus-3 economies, growth in related services remains more fragile than hoped for.
Geopolitical risks exacerbating vulnerabilities
Among the main risks are US protectionist measures, which, if escalated, could worsen the regional economic slowdown to the point of bringing growth to its lowest level since the Asian financial crisis. Adding to this picture are persistent political uncertainty in the United States, potential energy crises stemming from the Iran-Israel conflict, and a possible worsening of global financial conditions with US rates likely to remain high for longer, strengthening the greenback and complicating local monetary management.
The conflict in the Middle East, in particular, has demonstrated the region's vulnerability to external shocks, with a major potential impact on energy prices and supplies via the Strait of Hormuz, which is crucial for oil exports from the Gulf. This factor could fuel imported inflation and further destabilise markets.
Policy initiatives and regional integration
Faced with these headwinds, governments in the region have adopted preventive measures, including monetary easing in several key ASEAN+3 countries, as well as fiscal programmes aimed at mitigating the direct impact of tariff increases. At the same time, emphasis is being placed on strengthening interregional cooperation and deepening internal economic integration, with the aim of reducing dependence on external markets, diversifying supply chains and improving resilience to external shocks.
Structural challenges and long-term issues
Beyond the immediate disruptions, ASEAN+3 faces fundamental challenges that must be addressed to ensure sustainable and inclusive development. Rapid demographic ageing, the emergence of new geo-economic divides, intensifying trade rivalries and the climate emergency are among the major issues that need to be addressed. The lack of concerted responses could slow growth for a long time and increase social and economic vulnerabilities in the region.
The AMRO report provides a snapshot of the ASEAN+3 region at a crossroads, torn between concerns about growing external risks and hopes for adaptive policies and deeper integration. While the expected economic slowdown is significant, it should not obscure the intrinsic strength of a region that remains one of the world's major growth hubs, capable of navigating complex circumstances and charting a more resilient course for the future.
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