Fiscal policy crossroads for ASEAN+3

In an opinion piece written by AMRO senior economist Koon Hui Tee, he pointed out that economies of the ASEAN+3 economic bloc face a fiscal policy crossroads as they confront both external headwinds and domestic structural challenges.

- MARIANNE GO

Heightened global uncertainty, which is being driven by shifting US trade policies and rising geopolitical tensions, he warned, is posing a risk to regional growth prospects, with narrowing fiscal space and elevated debt servicing burdens, underscoring the need for continued fiscal consolidation.

ASEAN+3 economic policymakers in the region, he urged, must strike a delicate balance between maintaining near-term fiscal flexibility and committing to long-term discipline, stressing that agile and responsive fiscal management is essential for deploying temporary and targeted measures to cushion against external shocks.

At the same time, he said, sustained efforts toward medium-term fiscal consolidation are crucial to rebuilding buffers and addressing growing expenditure needs, particularly those associated with an aging population and climate change-related demands.

Structural reforms, he wrote, are key to complementing fiscal consolidation efforts and unlocking long-term growth potential, while enhancing competition, streamlining regulations and promoting technology, of which adoption can significantly boost productivity and improve competitiveness. For economies facing aging demographic pressures, productivity gains, he said, will be vital to offset the adverse effects of a shrinking labor force.