GLOBAL CHALLENGES TEST ASIA’S STRENGTH
After facing the global and Asian financial crises, Asia faces new challenges such as the US protectionism policy and Brexit
Asia has remained resilient and is expected to remain strong amid present challenges in the global economy, said the top official of the Bangko Sentral ng Pilipinas (BSP).
BSP Governor Amando Tetangco Jr. said that throughout the six years after the height of the global financial crisis, emerging Asia did the heavy lifting for global growth, growing at an average of 7.5 percent from 2009 to 2014 in contrast to global expectations.
Tetangco said that Asia’s resiliency during the global financial crisis was sharpened by the 1997 Asian financial crisis, which had shaped the key financial, structural and institutional reforms that defined Asian economies.
Tetangco noted that relative to the rest of the world, the depth of the output decline in Asia was smaller by almost three percentage points and the cumulative output loss was lower by 11 percent of annualized gross domestic product in the third quarter of 2008.
Tetangco was the keynote speaker at the BSP-Official Monetary and Financial Institutions Debate of the 3rd Asean Finance Ministers’ and Central Bank Governors’ Joint Meeting and Related Meeting held at Shangri-La’s Mactan Resort and Spa last Monday.
He noted that reforms in the post-Asian crisis years have served Asia in good stead.
On the macroeconomic policy level, Tetangco said, policymak- ers in Asia have adopted a more proactive and rigorous approach to banking supervision. Likewise, macroprudential policies became Asian central banks’ weapon in addressing emerging systemic risks in the financial sector.
“Today, we find a global economy that is transitioning from a deep recession to a period of relatively stable growth,” Tetangco said.
He added that emerging challenges in the global economy will continue to test Asia’s resilience.
“Asia’s ability to withstand these shocks will crucially depend on the structural reforms and proactive policies that it will undertake in key areas,” he said.
He cited new challenges faced by Asia like the growing protectionism in the US and the Brexit case, which could trigger a shift in the flow of trade; and financial spillovers due to possible US interest rate hikes and uncertainty of monetary policies, which could contribute to large currency depreciation, inflationary pressures and affect investor appetite.
Tetangco said sustaining growth through the middle-income band requires significant reforms to the institutions of economic policy-making and political processes, while prudent policies can also help mitigate the adverse effects of some Asian countries with aging populations.