As ASEAN economies continue their path to safely reopening and getting back to business, they must also manage growing economic challenges and identify how best to seize new opportunities for a resilient, inclusive, and sustainable recovery.
The first challenge is the Russian invasion of Ukraine which has caused tremendous suffering and sent shockwaves across the global economy.The second challenge is increasing interest rates in the United States which are complicating the inflation battle amid heightened uncertainties. Widening interest rate differentials between ASEAN economies and the US and a shift in investor confidence could trigger a sudden reversal in capital flows, currency depreciation, and financial instability.
To sustain momentum for recovery, the region must stay vigilant and prepare for collective action to avert regional financial instability. In particular, authorities must carefully manage the combined effects of higher oil prices, US interest rate hikes, and the phasing out of fiscal stimulus.