‘ASIA MUST FOCUS ON STABILITY’
Consider macroprudential measures to complement monetary policy, urges Amro
ASIAN policymakers need to prioritise stability over boosting economic growth in the face of global trade risks and the tightening of financial conditions, said a regional body.
With low interest rates fuelling a debt build-up across many countries, authorities should consider targeted macroprudential measures to complement monetary policy, said the Asean +3 Macroeconomic Research Office, known as Amro, in its inaugural economic outlook report yesterday.
“The balancing act between economic growth and financial stability has become more delicate,” said Amro.
“It would be prudent for policy makers to prioritise financial stability.”
Twenty years after the Asian financial crisis and a decade since the global credit crunch, the region is still battling with a debt problem.
Exposure to China’s slowdown, fluctuating commodity prices and currency volatility are just some of the risks.
While countries had sizeable buffers to cushion against shocks, the risk to financial stability couldn’t be ignored, said Amro.
Amro acts as a macroeconomic surveillance unit for the region and its report, which was released at the annual meeting of the Asian Development Bank in Yokohama, covers countries in Asean, as well as China, Japan and South Korea.
Amro’s growth outlook for many countries in the region was similar to forecasts released last month by the International Monetary Fund.
Growth in China would probably ease to 6.5 per cent this year and 6.3 per cent next year, while expansion in Japan and South Korea this year would also fall short of last year’s levels.
In Southeast Asia, Amro forecasts Indonesia’s economy would grow at a faster pace of 5.1 per cent this year and 5.2 per cent next year.
Growth in most economies in the region are expected to accelerate this year.
The global economy remained vulnerable to policy uncertainty and a slowdown in the United States and China, the biggest sources of trade, might have a disproportionate impact on the region’s growth, said Amro. Bloomberg