This chapter provides a review of macroeconomic trends among the member countries of ASEAN in 2023. It first examines how the global environment affected regional economies, assessing the effects of a difficult world economy marked by the adverse effects of monetary tightening, a sluggish Chinese economy, further fragmentations of global supply chains, and the onset of the Israel-Hamas War when the Ukraine War was showing no signs of abating. It then examines why ASEAN economies demonstrated an encouraging degree of resilience in the face of these global headwinds. All the countries studied recorded positive, albeit slowing, growth rates. The reasons for this resilience include sound fiscal and monetary policies from policymakers as well as structural advantages. Finally, the chapter concludes with the cyclical prospects of the region in 2024. The positive outlook is underpinned by a robust trade rebound, supply chain reconfigurations into the region, and increased infrastructure spending.

An Extraordinarily Challenging 2023 for Southeast Asia

A confluence of disturbances hurt the global economy in 2023. Rising inflation that warranted hawkish monetary tightening from central banks, coupled with China's domestic woes, contributed to weak global demand. As a result, global economic growth eased, from 3.5 per cent in 2022 to 3.0 per cent in 2023, according to the International Monetary Fund. In parallel, the world economy saw a pronounced slowing in export demand. Reflecting the difficulties in 2023 to date, the World Trade Organization (WTO) has slashed its forecast for world merchandise trade volume growth to 0.8, less than half of its April forecast of 1.7 per cent. It further concluded that the risks were to the downside given the headwinds created by a sharper-than-expected slowdown in China and the re-emergence of inflation in advanced economies that would warrant keeping interest rates higher for a longer period.