AMRO today released its ASEAN+3 Fiscal Policy Report (AFPR) 2026, providing an in-depth assessment of recent fiscal developments and outlook, as well as key policy priorities for ASEAN+3 economies. The report underscores the urgent need for policymakers to reinforce fiscal management as they confront a new wave of shocks alongside persistent structural headwinds.
With fiscal positions weakened and policy space narrowed, policymakers must prioritize safeguarding fiscal sustainability and rebuilding buffers. At the same time, growing demands on fiscal policy require governments not only to respond to immediate shocks, but also to support growth, facilitate structural transformation, and reduce poverty and inequality over the medium to long term. These competing demands are compounded by sluggish revenue growth and rigid budget structures.
Addressing these challenges will require stronger fiscal management frameworks, including improvements in risk management, fiscal aggregate management, strategic resource allocation, spending efficiency, and revenue mobilization.
“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,” said AMRO Deputy Director Abdurohman (Functional Surveillance and Research). “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.”
The report also highlights 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 and proactive management of contingent liabilities are essential, especially those related to government guarantees, public-private partnerships, state-owned enterprises, and social security obligations.
Enhancing fiscal aggregate management, alongside improving strategic resource allocation and spending efficiency, will be critical to meeting rising expenditure demands in line with national priorities, while safeguarding fiscal sustainability and rebuilding buffers.
“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,” said Seung Hyung (Luke) Hong, AMRO Group Head for Fiscal Surveillance and lead author of the report. “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.”
The report further encourages policymakers to implement comprehensive and durable revenue-enhancing measures, including strengthening tax administration—particularly through digitalization—rationalizing tax expenditures, and advancing structural reforms to major taxes.
