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AMRO's quarterly update of the ASEAN-China-Japan-ROK Regional Economic Outlook 2024 forecast that the ASEAN-China-Japan-ROK (10+3) region will grow by 4.4% and 4.3% respectively in 2024 and 2025, basically unchanged from the April forecast. Favorable export prospects, strong domestic demand and continued recovery in tourism will support growth in the region this year and next. The report lowered the forecast for inflation in the region (excluding Laos and Myanmar) to 2.1% in 2024, with a slight increase to 2.3% in 2025. Here are five takeaways from the report:

First, supported by strong domestic demand, APT growth has continued to gain momentum. Strong employment conditions and stable prices have supported private consumption in the region. Retail sales were supported by a recovery in travel and tourism. Improved prospects in key export markets have boosted business confidence, but lingering economic uncertainty has dampened investment growth in most economies.

Second, the region's commodity exports are recovering. Export growth in 12 economies was higher than in the second half of 2023, driven by improving overseas demand and favorable export prices. Despite concerns about disruptions to shipping in the Red Sea, export momentum is expected to gain momentum as the global economy strengthens. The global electronics rebound is also benefiting more economies in the region. With the help of favorable visa policies and the return of Chinese tourists, travel and tourism have approached pre-pandemic levels.

Third, inflation has risen slightly since the April forecast. Higher global energy and transport prices have prevented a broad-based decline in overall 10+3 inflation. On the back of escalating conflict in the Middle East and oil production cuts, crude oil prices have risen sharply, while shipping disruptions in the Red Sea have led to higher freight rates. Nonetheless, inflation in the region remains largely under control, although strong domestic demand has kept core inflation high in some economies.

Fourth, the APT region is likely to make a steady recovery in the near future. The region is expected to grow 4.4 percent this year, down slightly from the 4.5 percent forecast in April. While special factors such as high borrowing costs have prompted some economies to downgrade their growth forecasts, these have been offset by an improving outlook for global demand. As the regional economy moves closer to trend growth, the growth forecast for 2025 remains largely unchanged at 4.3%. Due to lower than expected food prices and imported inflation, inflation in 12 of the 10+3 economies (excluding Laos and Myanmar) has been revised down to 2.1%.

Fifth, overall risks to the region's outlook have improved since April. However, various risks may put pressure on the baseline forecast. The risks associated with the United States have become more salient. A larger-than-expected tightening of US monetary policy could exacerbate capital outflows and put pressure on many of the region's currencies. Volatility in 10+3 asset markets is likely to increase ahead of the US presidential election. Soaring commodity and shipping prices remain a concern, and food price volatility triggered by La Nina and ongoing geopolitical conflicts could exacerbate these costs. A slowdown in the US or Europe could have a negative impact on the region by reducing trade, investment and tourism flows.

(The 10+3 region includes 14 economies including 10 ASEAN countries, China, Hong Kong, Japan and South Korea)