Why Asean+3 must act fast on fiscal health
KUALA LUMPUR: Fiscal sustainability in the Asean+3 region is under increasing pressure, with weaker fiscal positions and shrinking policy space limiting governments' ability to respond effectively to future shocks, according to AMRO.
In its Asean+3 Fiscal Policy Report 2026, the regional surveillance body urged policymakers to rebuild fiscal buffers and strengthen long-term resilience.
It noted that governments are facing growing and competing fiscal demands.
This includes the need to manage near-term shocks while also supporting economic growth, enabling structural transformation, and addressing poverty and inequality over the medium to long term.
These pressures are being intensified by sluggish revenue growth and rigid budget structures.
To address these challenges, the report stressed the need for stronger fiscal management frameworks.
This includes improved risk management, better control of fiscal aggregates, more strategic resource allocation, higher spending efficiency and stronger revenue mobilisation.
AMRO deputy director for functional surveillance and research Abdurohman said 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.
"As uncertainty persists, strengthening the systematic management of macroeconomic risks through robust contingency planning, proactive stakeholder engagement, and clear and transparent communication is increasingly critical," he said.
The report also highlighted the importance of comprehensive fiscal risk management, urging policymakers to strengthen the identification, assessment and disclosure of fiscal risks.
Particular attention should be given to liabilities outside the budget, including borrowing by off-budget public entities and government arrears.
Systematic monitoring of contingent liabilities is essential, especially those related to government guarantees, public-private partnerships, state-owned enterprises and social security obligations.
Beyond risk management, AMRO said enhancing fiscal aggregate management, alongside improving strategic resource allocation and spending efficiency, will be critical to meeting rising expenditure demands while safeguarding fiscal sustainability and rebuilding buffers.
AMRO group head for fiscal surveillance and lead author of the report Seung Hyung Luke Hong said establishing fiscal anchors to guide medium to long-term fiscal aggregates onto a sustainable path is essential.
He added that both allocative and implementation efficiency in spending must be strengthened.
"This can 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," he said.