ASEAN+3 Growth Forecast Raised on Stronger AI Demand

AMRO released its July 2026 Quarterly Update of the ASEAN+3 Regional Economic Outlook (AREO) today, projecting the ASEAN+3 region to grow by 4.1 percent in 2026, up from its June forecast of 4.0 percent, before moderating slightly to 4.0 percent in 2027. Headline inflation is projected at 1.6 percent in 2026, down from 1.8 percent previously, reflecting lower global commodity price assumptions.The upgraded outlook reflects sustained momentum in the region's technology sector, particularly robust demand for semiconductors and other AI-related products, alongside a more favorable global commodity price outlook. Firm household spending, resilient investment, and robust semiconductor and electronics exports are expected to continue driving growth. Energy and industrial input supply disruptions proved less severe than initially feared, with manufacturing activity continuing to expand."ASEAN+3 has remained resilient, supported by firm domestic demand and its central role in global AI supply chains," said AMRO Chief Economist Dong He. "The impact of the Middle East conflict has also been less severe than initially expected, although elevated energy and input costs continue to pose risks to inflation and industrial activity."Inflationary pressures have remained broadly contained, with price increases concentrated mainly in energy and transport, while core inflation has risen only modestly. However, food inflation could rise as higher input costs and adverse weather conditions feed through to prices.AMRO noted that the outlook remains subject to significant uncertainty. Renewed escalation in the Middle East conflict could raise energy, shipping, and food costs, while weaker-than-expected technology demand could weigh on regional exports and investment. Given the importance of AI-related demand to the regional outlook, even a moderate slowdown in global technology investment – to its 2024 pace – could slow ASEAN+3 growth to 2.5 percent in 2027, its weakest rate since the Asian Financial Crisis, excluding the pandemic years. Financial market volatility and rising trade protectionism could further weigh on the outlook."The wide range of plausible outcomes underscores the importance of continued vigilance and sound macroeconomic policies," He added. "Policymakers will need to respond flexibly to differing domestic conditions and rapidly evolving external risks, particularly the AI cycle and the Middle East conflict."Further details are available in AMRO's July 2026 Quarterly Update of the ASEAN+3 Regional Economic Outlook. The next update will be released on October 5.

ASEAN+3 Growth Forecast Raised on Stronger AI Demand

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