The United Nations expects the world economy to grow by a sustainable three per cent in 1997, an increase over the 2.8 per cent achieved in 1996. In addition, more countries will enjoy this growth. Gross Domestic Product (GDP) of the developed economies grew slightly faster in 1996 at 2.3 per cent while that of developing countries saw a growth of 5.7 per cent. With low inflation in most developed countries, (2.5 per cent) economic development is expected to be more sustainable than in previous years.

World trade slowed down in 1996, growing less rapidly than it did in the previous two years, and only a modest accelaration of 7.3 per cent is forecast for 1997. This may not be much of a concern since trade has grown considerably in 1995 and 1996. Of greater concern is that the brief period of strong international prices for non-fuel commodities seems to have ended. Fortunately, private financial flows continue to grow even as flows of official development assistance remain weak.

Economic developments in ASEAN suggest that despite some concerns, particularly, the slowdown in export growth and high current account deficits, the region's economic growth did not slow down significantly while prospects for higher growth rates in 1997 appear favourable. Nevertheless, ASEAN's possible loss of competitiveness to other regions should not be taken lightly as ASEAN's economic slowdown in 1996 suggests.

In fact, economic developments in 1996 indicate that ASEAN should continue to remain focused on achieving closer economic integration as directed by ASEAN Leaders at their Fifth Summit in Bangkok in December 1995. For this reason, economic cooperation activities in ASEAN during the period under review continued the process of enhancing the economic integration of the Member Countries.