Asia seen to weather impacts of Trump protectionist policy, Brexit
LAPU-LAPU CITY – Asia is poised to withstand the impacts of US President Donald Trump’s protectionist policy and the looming Brexit with the region’s growing domestic demand and the financial structures and measures set by Asian’s policymakers gained from experiences from the 1997 Asian Financial Crisis and the 2007-2008 Global Financial Crisis.
This was the main discussion during the Bangko Sentral ng Pilipinas (BSP) – Official Monetary and Financial Institutions Forum (OMFIF) Debate, an event attended by Central Bank Governors and their deputies.
The event, held at the Shangri-La Mactan Island Resort and Spa, also opened the first day of the 3rd ASEAN (Association of Southeast Asian Nations) Finance Ministers’ and Central Bank Governors’ Joint Meetings and Related Meetings.
It was moderated by international broadcast journalist Rico Hizon.
Day one of the weeklong ASEAN event was an exhaustive debate on whether or not Asia is bound to follow the “new mediocre” narrative – a phase of relatively low growth for a long period – of advanced economics such as the United State and countries in Europe.
“Emerging Asia has been the doing the heavy lifting of global growth at an average of 7.5 percent between 2009 and 2014. While the International Monetary Fund (IMF) sees near-term outlook for Asia is strong and robust, updates are telling us that we’re no longer seeing double-digit growth for Asia,” said Tetangco in his opening remarks.
Citing IMF data, Tetangco said global growth rate is at 3.4% in 2017 and 3.6% in 2018. This is only a few point higher than the 2010-2016 after-crisis rate of 3.8% but lower than the pre-crisis growth rate of 4.5 percent.
But former Bank of Thailand Governor Tarisa Watanagase said most of the ASEAN economies are in the “long-term growth path” because policymakers have learned to install internal measures to make them resilient.
Watanagase said the regional economy will remain resilient with a strong banking sector and limited, non-heavily indebted corporate and consumer sectors.
“In this part of the world, we have high reserves. This is our insurance, our self-protection that we have put into place. (Because of these measures), we will have fewer sleepless nights,” she said.
Watanagase said the ASEAN economic block, composed of 625 million people with an industry totaling 2.4 trillion US dollars, “very well embedded regionally and globally.”
But growth will still depend on how each respective country hurdles challenges.
BSP Monetary Board Member Felipe Medalla said Asia in general is more conservative than the rest of the world in terms of reserve accumulation.
“The reserves that we’ve accumulated between 2008 [and] 2013 have now become our buffer,” he said.
But the future looks bleak for the “fragile five” countries of Turkey, Brazil, India, South Africa and Indonesia. Fragile five was a term coined by a research analysist from Morgan Stanly to describe economies which have become overly dependent on foreign investments to finance their growth.
Watanagase said growth will happen if countries invest in productivity enhancement, innovation, research and development, manpower, and technology.
“But they (countries) need patience, investment and policy continuity… and these factors can be easily disrupted,” she said.
Citing data from the Asian Development Bank, Watanagase said Asia will need $1.7 trillion annual investment to sustain its growth, reduce poverty and address climate change issues.
She also noted that education reforms have to be implemented to fill the gap in digital divide in the regional and international market.
In the midst of the discussion, Danny Quah, professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, told fellow economists to look within to see the strength of Asian countries.
“The idea that Asia grows because the West buys needs to be placed at the back of history. Asia grew by five trillion dollars between 2008 [and] 2012 when the US economy flattened on its back at less than $1 trillion dollars. We will continue to tell that story if our policymakers continue to be wise,” said Quah.
Among the audience, Quah also introduced the concept of a geopolitical narrative, which Asia should start to formulate as it takes a more prominent role in the global economy.
“America’s school children were told that we need to grow and save the world because we have the responsibility to the world. America is not anymore interested with that narrative while Europe is challenged (by several issues),” he said.
Lord Desai, professor of the London School of Economics and Political Science, said President Trump’s protectionist policy may have shaken the world but eventually, he will need to work with economic players.
“Nobody can control an economy as large as America,” he said.
Quah said Asia believes in a world of full of win-win propositions. This narrative should be shared to President Trump.
“Trump thinks that America is losing because Asia is winning. We need to tell him of this win-win proposition,” said.
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