While Asia remains economically strong compared to the rest of the world, its resiliency will continue to be tested by a host of external and internal factors that have continued to hinder Western economies over the past decade.
Such global phenomena—growing protection of intra-Asean trade where Asia may be limiting its growth potential, financial spillovers which may result to capital flow reversals and large currency depreciation, the middle income trap where sustained rapid growth is difficult to maintain, and the demographics factor—can challenge Asia’s mettle in the next few years.
Demographics is taken to mean the prevalence and absence of an aged population among certain Asian nations. Prudent policies here are needed to counter the adverse effects of such demographic trends since the presence of a growing aged sector may lead to lowered productivity and less consumer activity.
Avoiding the trap
According to Bangko ng Sentral ng Pilipinas (BSP) Gov. Amando Tetangco Jr., the Asian Development Bank (ADB) has observed that growth among emerging Asian economies was down around two percent from the period 2008-14.
While far from stagnant, certain steps need to be taken in order to avoid falling into the middle-income trap or “the new mediocre.”
These include the implementation of sound macroeconomic polices that counter boom-bust cycles, along with policies that promote education and infrastructure and build strong governance and institutions.
Tetangco was the keynote speaker during the 3rd Asean Finance Ministers’and Central Bank Governors‘ Joint Meeting and Related Meetings held at the Shangri-La Mactan Resort and Spa held earlier this month.
Luckily, Asia’s undoing during the 1997 Asian financial crisis has provided the impetus and basis to shape its key financial, structural, and institutional reforms that have defined the Asian economies following the crisis.
Policymakers also adapted a more rigorous and proactive approach to banking supervision.
Macroprudential policies likewise became staples in the arsenal of Asian central banks in addressing systemic emerging risks in the financial sector. These banks also accumulated large foreign reserves to serve as buffers against a sudden reversal of capital flows.
“Better yet, reforms were also implemented at the regional level. Following the Asian financial crisis, the Asean and Asean+3 countries have adapted four key regional initiatives aimed at strengthening the region’s capability to prevent and manage future financial crises. These are the Asean Surveillance Process, Asean+3 Economic Review and Policy Dialogue, and Chiang Mai Initiative, and Asian Bond Market Initiative,” Tetangco added.
Cebu and Lapu-Lapu City also hosted the 12th Asean Finance Ministers Investors Forum (AFMIS) held later during the week with Finance Secretary Carlos Dominguez III of the Philippines and Asean Deputy Secretary General Lim Hong Lin delivering the welcome remarks.
As host of the 50th anniversary of Asean, the Philippines will host several regional meetings in the cities and provinces of Bohol, Cebu Davao, Iloilo, Palawan, Manila, and others in the next several months.
By RICHARD RAMOS