However, it is better positioned to navigate an energy shock, as its economies are more energy-efficient and less oil-dependent, entered this period with low inflation, and most retain meaningful policy space to respond.

The region expanded by 4.3 per cent in 2025, well above the 3.8 per cent projected in the immediate aftermath of the April 2025 tariff shock.

Economic activity remained supported by firm domestic demand, robust exports, boosted by AI-driven semiconductor demand, sustained investment, and strengthening intraregional economic linkages.

Amid higher global energy prices, AREO 2026 forecasts headline inflation to rise from 0.9 per cent in 2025 to 1.4 per cent in 2026 and 1.5 per cent in 2027.

Dong He stressed that as the global economy is battered by one shock after another, preserving policy flexibility is critical to preventing worse outcomes such as stagflation.

Central banks should maintain orderly market conditions and financial stability, and act decisively should supply shocks lead to sustained inflation.

On the fiscal side, governments should prioritise targeted support for vulnerable groups, while avoiding broad-based measures that could fuel inflation or undermine fiscal sustainability, he advised.

The report also highlights a fundamental structural transformation underpinning the region’s resilience. Over the past two decades, ASEAN+3 has become more regionally anchored, with denser and more interconnected production networks and a decisive shift toward intraregional sources of demand.

The share of the region’s value-added exports to the US has declined from about one-third to 20 per cent, while the share absorbed within the region has risen to nearly 30 per cent.

ASEAN+3 is now the world’s largest market, accounting for 28 per cent of global final demand.

-- BERNAMA-VNA