Estimates based on the most recent data indicate that the growth of American and E.U. economies (41% of global GDP) will slow down from 1.9% this year to a sharp decline and a slow recovery in the next two years.

That’s all one can say now because the trans-Atlantic recession is driven by energy and food prices as a result of the raging NATO-Russia war, and growing security tensions around Iran and a broader Indo-Pacific theater.

Those uncertainties are posing major problems for monetary authorities in calibrating the degree, and the duration, of credit restraint in the U.S. and in the European trading bloc.

What seems obvious, though, is that a significant damage to demand and output has been done already by the soaring inflation. In the U.S., the real disposable personal income has fallen at an annual rate of 7.6% in the first nine months of this year. Similarly, real wages in the E.U. are declining at a rate of 6%.

This, however, is not just an economic crisis caused by households’ losses of real purchasing power. No, the very foundations of the world economy are shaken by major powers military confrontation on apparently irreconcilable security, ideological and systemic grounds.

ASEAN is showing the way

Europe, as always, is a proverbial powder keg. It shows that lessons of its sad and tragic history have not been learned. Again and again, Europe’s leaders are lacking wisdom and courage to tame centuries’ old demons of hatred, revenge and intolerance.

That’s where east Asians are showing the new way. Led by the ASEAN -- ten countries of the Association of Southeast Asian Nations and an old playground of Europe’s colonial powers – east Asia is now strongly committed to peace, economic development, free trade and non-interference in its domestic and regional affairs.    

No wonder, then, that ASEAN’s five largest economies (aka ASEAN-5: Indonesia, Thailand, Malaysia, Philippines and Singapore) are expected to grow 5.5% this year, and to stay in the growth range of 5% to 6% during 2023.

The remarkable aspect of those countries is how much they learned from the devastating Asian economic crisis of the late 1990s. Most of them now have balanced foreign accounts, relatively low inflation rates and are well integrated into ASEAN’s free trade flows of goods and services. Since the beginning of this year, they have also opened up to an ASEAN Plus free trade area including China, Japan, South Korea, Australia and New Zealand.

China, of course, looms large in ASEAN’s trade and investments. In the first ten months of this year, ASEAN remained China’s by far the biggest trade partner. During that period, China’s $800 billions of bilateral trade with ASEAN (an annual increase of 14%) accounted for 15.2% of Beijing’s total foreign trade.

That strongly growing intra-regional trade plays an important role in east Asia’s rapid economic development. It also explains why this year that part of the world – formally classified as “Emerging and Developing Asia” -- experienced an estimated growth rate of 4.5%.

For next year, east Asia’s sound fundamentals offer plenty of room for supportive monetary and fiscal policy to maintain the forward growth momentum toward 5%.

“Peaceful anchor for global stability”

China’s will play a major role in region’s improving economic outlook as Beijing strives to return to a higher and stable non-inflationary growth.

First, China is now attempting to “optimize” its pandemic measures by targeting the most vulnerable groups with testing, vaccinations and more effective drugs.

Second, price stability and public sector accounts are allowing a strong monetary and fiscal support to demand management.

A sustained monetary expansion to deal with cyclical and structural difficulties is taking place in an environment of a very low consumer price inflation (1.6% in November), record high grain harvests and stable and reasonably priced energy supplies. Last month, the broad monetary aggregate M2 was growing at an annual rate of 12.4%.

The fiscal stimulus is estimated at more than 1% of GDP and is channeled through subsidies and lower taxes and fees.

The current account surplus of 3% of GDP will also make a positive contribution to growth.

Unfortunately, the vibrant east Asia’s economy is not immune to security problems. Flashpoints like the Korean Peninsula, contested maritime borders in the South China Sea and Taiwan’s independence temptations are serious dangers in a competitive environment seeking to contain China’s economic development and its global power projections.

The silver lining could be ASEAN’s refusal to be drawn into adversarial schemes and military clashes. While taking over ASEAN’s next year presidency at the group’s last month summit in Phnom Penh, Cambodia, the Indonesian President Joko Widodo pledged that the region will be a “peaceful anchor for global stability” rather than “a proxy to any powers."