The year 2008 will be remembered for the tragedy of Cyclone Nargis, which devastated the Ayeyarwady delta region of Myanmar, resulting in the loss of more than 140,000 lives. More broadly, it will also be remembered for the onset of the global financial crisis which clouded the performance of Southeast Asian economies and led to a downturn in the later part of the year. Growth rates were starting to plummet, especially in the more export-dependent economies, accompanied by the spectre of rising unemployment into 2009.

Politics in both Malaysia and Thailand were more tumultuous. In Malaysia, pressures for change led the ruling UMNO-dominated coalition to lose its two- thirds majority in Parliament in the general election in March 2008, ushering in a period of uncertainty and forcing incumbent Prime Minister Abdullah Badawi to agree to step down in March 2009 in favour of his deputy, Najib Razak. Thailand was increasingly polarized between anti- and pro-Thaksin political forces. The former seemed to triumph when, through unprecedented street protests and siege of government buildings and airports, they succeeded in forcing two governments, perceived as pro-Thaksin, to resign. Defections by parliamentarians from the ruling party then enabled the Democrat Party to form the government. However, the risk remained that the same destabilizing tactics might be used against the new government by pro-Thaksin forces.

Elsewhere in Southeast Asia, there was more political continuity than change. In Myanmar, Nargis resulted in greater interaction between the international community and the ruling junta but there was no deviation from the regime's plans to have a new constitutional order dominated by the military, as it successfully conducted a referendum on its draft constitution to achieve this end. Indonesia, the largest country in the region, impressed through its stability and progress, though the clouds of the global economic downturn raised questions about how it would weather the crisis.