KUALA LUMPUR: Policymakers in the ASEAN+3 region must urgently reinforce fiscal management frameworks as fiscal buffers remain weak and new external shocks intensify, according to the ASEAN+3 Macroeconomic Research Office (AMRO).
In its ASEAN+3 Fiscal Policy Report (AFPR) 2026, released today, AMRO said governments are facing tightening fiscal space at a time when they are expected not only to cushion near‑term economic shocks, but also to support growth, drive structural transformation, and reduce poverty and inequality over the medium to long term.
The report noted that fiscal positions across the region have weakened following years of active policy support, while revenue growth remains sluggish and budget structures are increasingly rigid, posing challenges to effective policymaking.
“With fiscal positions weakened and policy space narrowed, policymakers must prioritise safeguarding fiscal sustainability and rebuilding buffers,” the report said, adding that stronger fiscal management will be key to meeting competing policy demands.
AMRO Deputy Director Abdurohman said fiscal policy must remain flexible in light of heightened global uncertainty, including rising risks from tariff escalation and volatile oil prices driven by ongoing geopolitical conflicts in the Middle East.
“Amid rising risks from tariff escalation and volatile global oil prices driven by ongoing geopolitical conflicts in the Middle East, fiscal policy must remain flexible to cushion adverse impacts and safeguard economic stability,” he said in the report.
He added that strengthened management of macroeconomic risks has become increasingly important, calling for robust contingency planning, proactive engagement with stakeholders and clear, transparent communication by governments.
The report highlighted comprehensive fiscal risk management as a key policy priority, urging authorities to strengthen the identification, assessment and disclosure of fiscal risks.
Particular attention should be given to liabilities outside the formal budget, including borrowing by off‑budget public entities and government arrears, it said.
“Systematic monitoring and proactive management of contingent liabilities are essential, especially those related to government guarantees, public‑private partnerships, state‑owned enterprises and social security obligations,” the report noted.
AMRO also underscored the need to enhance fiscal aggregate management, improve strategic resource allocation and raise spending efficiency to meet growing expenditure demands while safeguarding fiscal sustainability.
AMRO Group Head for Fiscal Surveillance and lead author of the report, Seung Hyung (Luke) Hong, said establishing credible fiscal anchors is crucial to guide medium‑ to long‑term fiscal aggregates onto a sustainable path.
“Establishing fiscal anchors to guide medium‑ to long‑term fiscal aggregates onto a sustainable path is essential. At the same time, both allocative and implementation efficiency in spending must be enhanced,” he said.
He said this could be achieved by strengthening medium‑term fiscal frameworks, embedding performance‑based approaches throughout the budget cycle, improving public investment management and reinforcing institutional foundations for budget execution.
On the revenue side, the report encouraged governments to implement comprehensive and durable revenue‑enhancing measures to address persistently weak revenue generation.
These include strengthening tax administration, particularly through greater digitalisation, rationalising tax expenditures and advancing structural reforms to major taxes, it said.
The AFPR 2026 provides an in‑depth assessment of recent fiscal developments and the outlook for ASEAN+3 economies, as well as key policy priorities aimed at strengthening fiscal resilience amid an increasingly uncertain global environment.
