Regional Outlook offers a succinct analysis of political and economic trends in Southeast Asian countries and their prospects for the forthcoming two years. Scholarly, yet written in an accessible style, it is designed for the busy executive, professional, diplomat, journalist, and interested observer. This annual publication, which the Institute launched in 1992, has built up a loyal following of readers in Singapore and beyond.

Last year's Regional Outlook warned that terrorism in the region would not recede any time soon. The attacks on Bali on 1 October 2005 underlined the continuing deadliness of this threat. Southern Thailand is another site of the destabilizing effects of terrorism. The terrorist attacks there not only eroded Thailand's sense of domestic security but also affected bilateral relations between Thailand and Malaysia. Apart from terrorism, the member states of the Association of Southeast Asian Nations (ASEAN) have had to contend with various natural disasters. The Boxing Day tsunami of 2004 is etched deeply into regional memory. The looming possibility of the avian influenza turning into a pandemic is an issue that calls for the closest regional and global cooperation. On the bright side, an East Asian Summit spearheaded by ASEAN and scheduled for December 2005 is the first step towards an integrated Asian community. However, any realistic appraisal needs to acknowledge hurdles ahead. Just five years into the new millennium, Asia's many challenges are clear.

On the economic front, a moderate economic slowdown is expected in Southeast Asia over the next two years. The main risks that could affect the region's economic outlook in 2006–2007 are high oil prices, China's overheating economy, the possibility of an avian flu pandemic, and rising global imbalances because of the financing of the US current account deficits by excess savings in East Asia. Sustained high oil prices, in particular, are a major risk to regional economic growth. If oil prices continue to rise, inflationary pressure will persist, eroding business and consumer confidence in the region.