Association of Southeast Asian Nations (ASEAN)+3 policymakers, including the Philippines, are urged to balance near-term spending with long-term fiscal discipline as shrinking fiscal space and rising debt costs stress the need for consolidation to meet climate- and aging-related demands, according to the ASEAN+3 Macroeconomic Research Office (AMRO).

“Narrowing fiscal space and elevating debt servicing burdens underscore the impetus for continued fiscal consolidation,” AMRO senior economist Koon Hui Tee said in a commentary published last week.

“Policymakers in the region must strike a delicate balance between maintaining near-term fiscal flexibility and committing to long-term discipline,” AMRO said.

In particular, AMRO said ASEAN+3—10 ASEAN member states plus China, Japan, and South Korea—governments need flexible fiscal management to roll out temporary and targeted measures that can soften the impact of external shocks.

To rebuild buffers and meet mounting spending needs, particularly those related to addressing climate change, AMRO said sustained efforts toward medium-term fiscal consolidation must be in place.

Two weeks ago, data from the Department of Budget and Management (DBM) revealed the Philippine government’s debt level is expected to exceed ₱19 trillion by the end of 2026, nearly 10-percent higher than the projected end-2025 level of ₱17.36 trillion.

DBM Secretary Amenah F. Pangandaman said next year’s debt level will remain “manageable” as it remains consistent with the government’s medium-term fiscal framework (MTFF).

For next year’s proposed national budget, the Marcos Jr. administration’s economic managers have approved a total of ₱6.793 trillion, which has been submitted to Malacañang and is now under review in Congress.

Pangandaman said that agency submissions for next year’s national budget proposal were “carefully evaluated given our limited fiscal space.”

AMRO argued that a credible MTFF with realistic targets, clear rules, and transparent implementation can back consolidation efforts and boost public trust.

As such, ASEAN+3 economies “should complement fiscal adjustment with reforms to improve institutional capacity. Stronger fiscal institutions enable fiscal policymakers to develop credible consolidation strategies, assess fiscal risks transparently, and implement policies with greater flexibility and accountability.”

AMRO also asserted a need for structural reforms to support fiscal consolidation and unlock long-term growth. This includes measures such as stronger competition, simpler regulations, and wider use of technology to raise productivity and competitiveness.

“However, structural reforms must also be designed to address potential downsides of the reforms. For instance, while AI [artificial intelligence] adoption offers significant productivity and innovation gains—stimulating investment and job creation, it also poses risks of job displacement,” AMRO noted.

“To manage this trade-off, reform strategies must simultaneously promote AI readiness and safeguard vulnerable workers,” AMRO said.