The 11 members of the Association of Southeast Asian Nations (ASEAN) remain the bright spot in a slowing global economy. It is estimated that they will grow this year at an annual rate of 5 percent while advanced economies continue their slowdown.

The four countries accounting for nearly three quarters of ASEAN economy – Indonesia, Vietnam, Malaysia and Singapore – started out the year on a very strong note, reporting their first quarter GDP growth rates in the range of 5.5 percent to 8 percent.

An unusual aspect of such a blistering growth performance is the fact that their sound fundamentals fully support high-capacity utilization rates in product and labor markets. That means that they might be able to maintain their growth rates despite energy price shocks and supply chain tensions caused by widening Middle East and European wars.

Indonesia -- the sprawling archipelago of 17,500 islands and ASEAN’s largest economy -- reported this year’s first quarter GDP growth of 5.6 percent while keeping inflation rate at 2.4 percent.

And with a trade surplus, budget deficit of about 3 percent of GDP, and public debt of 40 percent of GDP Indonesia has, in case of need, quite a bit of room for tax cuts, higher government spending and lower interest rates for an expansionary monetary-fiscal policy mix.

Strong growth and good fundamentals

Vietnam, a booming Asian economy, reported a 7.8 percent GDP growth in the first quarter. A trade surplus of 4 percent of GDP reflects Vietnam’s strong external demand as a powerful growth driver.

Predictably, buoyant domestic demand and soaring export sales have accelerated core inflation to 4.7 percent in April. In spite of that, Vietnam’s public finances remain sound, with budget deficits of 2 percent of GDP and public debt of 30 percent of GDP.

Malaysia’s economy grew at an annual rate of 5.4 percent in the first three months of this year on strong household spending, business investments and export sales. A trade surplus in the range of 2 percent to 3 percent of GDP is also a positive contribution to economic growth. Inflation was below 2 percent in April, and public finances are relatively sound with budget deficits of 4 percent of GDP and a public debt of about 60 percent of GDP.

Singapore’s GDP growth of 6 percent in the first quarter was driven by wholesales trade, financial services and manufacturing. The official growth forecast for this year has been brought down to the range of 2 percent to 4 percent because of the Middle East war, high energy costs and supply chain problems. Inflation in April was 1.8 percent, and a budget surplus for 2026 is expected at 1 percent of GDP.

Singapore retains a triple A credit rating from all major agencies despite a very large public debt because big and consistent trade surpluses have brought its net international investment position to an impressive $1.4 trillion at the end of last year.

Alternative energy sources

ASEAN, therefore, shows that it could maintain a relatively high growth at a time when advanced economies keep struggling with rising inflation and growth recession.

But ASEAN’s economic success story would be incomplete without the important role played by its rapidly growing trade with China. In the first four months of this year, ASEAN’s trade with China soared 19 percent, as export and import business with its large neighbor increased by the same amount. Still, the trade balance favored China with a surplus of $97 billion.

China and ASEAN are each other’s largest trade partners. The biggest volume of trade with China during the January-April interval was recorded by Vietnam, followed by Malaysia and Singapore. And the largest increases in bilateral trade were made by Indonesia (+32 percent) and Vietnam (+24 percent).

The steady growth of ASEAN’s China trade seems to have become an insurance against vagaries of regulatory and security driven changes in U.S. and the E.U. That most probably was one of the main factors behind this surging volume of ASEAN-China business in the first four months of this year.

The energy price shock will be difficult to manage, though, because Middle East hostilities will continue to disrupt energy supplies. Negotiations with Iran are complex and uncertain. Washington and Tehran are far apart. Their concessions to narrow the gap are very unlikely. That will keep energy supplies difficult and energy prices at levels feeding rising inflation pressures.

The only solution is an alternative source of energy as China and India have done by securing steady oil and gas supplies from Russia. Indonesia, Vietnam, Thailand and Singapore are also doing that. Beyond fossil fuels, some ASEAN countries are working with Russia on nuclear energy to provide alternative long-term power sources.