Southeast Asia’s resilience vs global headwinds cited

Speaking during the 33rd meeting of the International Monetary Fund (IMF)’s International Monetary and Financial Committee, Malaysian central bank Governor Zeti Akhtar Aziz said expansion in the region should steady in the next two years.

“In the Southeast Asia Voting Group (SEAVG) economies, growth is expected to remain on a steady growth trajectory, as earlier structural reforms, strong fundamentals and policy buffers support SEAVG economies navigate the challenging environment,” Ms. Aziz of the Bank Negara Malaysia said in a statement delivered over the weekend on behalf of the grouping’s 13 economies, namely: Brunei Darussalam, Cambodia, Fiji, Indonesia, Laos, Malaysia, Myanmar, Nepal, Singapore, Thailand, Tonga, Vietnam and the Philippines.

The official cited low productivity growth among advanced economies amid a backdrop of tighter global liquidity conditions, China’s economic rebalancing which has led to weak external trade, and risk aversion against emerging markets as main sources of uncertainty.

“While downside risks have become more prominent, SEAVG economies remain resilient to the potential impact of these risks,” the statement read further. “In an environment of heightened risks, our authorities remain vigilant and continue to strengthen policy frameworks to proactively address emerging vulnerabilities.”

In the April issue of its World Economic Outlook, the IMF hiked its forecast growth for Emerging and Developing Asia to 6.4% for 2016 and 6.3% in 2017, up by one percentage point each from its earlier estimates issued in January.

Growth projections in the so-called ASEAN-5 — composed of Indonesia, Malaysia, Philippines, Thailand and Vietnam — were retained at 4.8% and 5.1% for this year and the next, with robust domestic demand and a recovery in exports seen driving expansion in 2017.

These projections compare to trimmed global output forecasts of 3.2% this year and 3.5% in 2017.

For the Philippines, IMF country representative Shanaka Jayanath Peiris has said that the multilateral lender kept its growth forecast at 6% in 2016 and 6.2% in 2017 from its February revision, driven by continued strong domestic demand as well as steady fiscal and monetary positions that should enable the country to remain among the region’s strongest performers.

The Philippines is a net creditor-member of the IMF.

Policy inputs and funding aid from the IMF should likewise support the crafting of more “potent” reforms that could improve the global growth outlook, Ms. Aziz said.

“While the appropriate policy mix will vary between countries, SEAVG authorities have undertaken and remain committed to further implement developmental initiatives that will strengthen human capital and raise productivity; scale up infrastructure investments; and enhance financial sector strength and resilience,” Ms. Aziz also said, emphasizing “collective responsibility” among nations to buoy global growth prospects. “These initiatives will contribute to achieving a more sustainable, balanced and inclusive growth in the region.”

Last Saturday, IMF’s steering committee urged member countries to boost “growth-friendly” spending and said the Fund should explore new lending tools to help deal with slowing global growth.

IMF Managing Director Christine Lagarde said in a press conference in Washington, D.C. that calmer markets since February had reduced the stress level at the IMF and World Bank spring meetings there, but the outlook was still fraught with downside risks from weak demand, the United Kingdom’s potential exit from the European Union, as well as low oil and commodity prices.

The International Monetary and Financial Committee said separately in a statement that “[d]ownside risks to the global economic outlook have increased since October, raising the possibility of a more generalized slowdown and a sudden pull-back of capital flows.”

Among others, the committee said a more “forceful and balanced policy mix” was needed to stimulate growth and avoid deflation and emphasized that monetary policy alone was not enough.

Source: BWorld Online