Hanoi (VNA) – Vietnam is forecast to enjoy a stable economic growth rateof 6.4 percent in 2017 and 2018.

This is one of theforecasts to emerge from the "ASEAN 3 Regional Economic Outlook", thefirst annual report produced by the ASEAN 3 Macro-economic Research Office(AMRO), released on May 4.

According to the report, the economic growth of the ten ASEAN countries alongwith China, Japan and the Republic of Korea (ASEAN 3) is expected reach 5.2 percentin 2017.

Though the recent recovery in global trade could possibly drive up regionalgrowth and exports, the ASEAN 3 growth rates in 2017 and 2018 are stillpredicted to be slightly lower than the level of 5.3 percent seen in the pastthree years.

Emerging economies like the Republic of Korea,Malaysia, Indonesia, the Philippines, Singapore, Thailand and Vietnam remainresilient even as volatility in global financial markets persists. Meanwhile, thedeveloping ASEAN economies of Cambodia, Laos and Myanmar continue to grow andreap benefits from regional integration.

Explaining the prediction, AMRO chief economistHoe Ee Khor said with the uncertain trade outlook, economic growth in theregion would continue to be driven primarily by domestic demand with supportfrom monetary and fiscal policy. “However, compared to 2016, room in monetaryand fiscal policy has generally narrowed,” Khor said.

In termof monetary policy, rising inflation and tightening global monetary conditionsin 2017 will reduce the room for regional economies to ease monetary policy tosupport growth, he said.

He notedthat countries with high credit growth or external debt would have to strugglewith maintaining financial stability while promoting growth by looseningmonetary policy. 

Inaddition, economies already relying on external financing for both currentaccounts and the fiscal balance would face tighter financing constraints whentrying to expand fiscal policy, Khor highlighted. 

He alsowarned of the capital outflow risks from emerging markets as a result of Fedinterest rate hikes, which would put additional pressure on the exchange rateand on foreign exchange reserve.

Therefore,Khor suggested regional governments should continue maintaining exchange rateflexibility combined with rational intervention in the foreign exchange marketto mitigate risks of external shocks.

“In thecurrent uncertain global environment, it would be prudent for policymakers toprioritise financial stability,” he said.

He alsourged regional governments and policymakers to speed up the structural reformagenda given that demand-stimulating measures could only be applicable in theshort-term.-VNA