Asean+3 weathered the last global tightening storm. What about the next?

AS GLOBAL financial conditions began to tighten in 2022, memories of past bouts of turbulence loomed large: the 2008 global financial crisis triggered many corporate defaults and severe credit contractions; the 2013 “taper tantrum” brought about acute exchange rate pressures and capital outflows, raising global concerns over several Asean economies.

Driving this new wave of concern was one of the sharpest tightening cycles in decades, unleashed by the US Federal Reserve and other major central banks after global inflation surged. The ultra-low interest rates and massive asset purchases of the Covid-19 era were quickly reversed. Interest rates jumped, the US dollar strengthened, and fears of renewed financial stress spread worldwide.

So as the cycle progressed through 2023, the question was inevitable: Would Asean+3, a cooperative grouping of the 10 Asean member states plus China, Japan, and South Korea, face another bout of financial turmoil?