Asean economies shielded against rate hike risks


The sound macroeconomic fundamentals and favorable demographics of the countries that make up the Association of Southeast Asian Nations (Asean) should serve as a buffer against any risks that may arise from the US Federal Reserve’s tapering of its bond purchases and the threat of rising interest rates.

During the 10th Asean Finance Ministers’ Investor Seminar (AFMIS) held on Tuesday, finance ministers from the region, which is set for economic integration starting 2015, affirmed the ability of member countries to withstand shocks from the US tapering and rising interest rates.

Emerging markets, including Asean members, are confronted with the threat of capital outflows resulting from the tapering of the US Federal Reserve’s bond-buying program.

The gradual withdrawal of the stimulus, which many fear could result in a hike in interest rates, comes amid views of an improving US economy.

The finance ministers said that Asean countries are expected to perform well vis-à-vis other emerging markets in the changing global economic landscape as they enjoy sound macroeconomic fundamentals and favorable demographics.

“The Asean region has fared well in the aftermath of the 2008 global financial crisis. With strong fundamentals and improved regional cooperation, resiliency has further improved,” U Win Shien, Finance and Revenue Minister of the Republic of Union of Myanmar said.

Josephine Teo, Senior Minister of State at the Ministry of Finance and Transport in Singapore, said that while Asean is not expected to be fully spared from the adverse effects of the tapering, any impact would be temporary.

Teo added that at the end of the day, investors would look at fundamentals in shaping their investment decisions. She said the strengths of Asean will eventually drive in more investments.

“If you look at FDIs [foreign direct investments]to the region, you will see that what is driving those is the prolonged period of macroeconomic stability. That has been boosting investor confidence,” she said.

Meanwhile, Philippine Finance Secretary Cesar Purisima said that one of the strengths of the region is its higher FDI compared with other countries in Asia. He noted that FDI inflows to Southeast Asia amounted to $110.29 billion in 2013.

Purisima also said that Asean enjoys comparative advantage in a wide range of sectors including electronics, garments, medical tourism, tourism, and shipbuilding, among others.

He said the benefits of having a bigger economy serve as a case for Asean member countries to accelerate the realization of a fully integrated region. As one regional economy, he said, Asean can attract even more investors who are in search of huge markets and operational hubs.

Asean is composed of Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

Member countries are targeting to integrate their economies starting next year and to realize a fully integrated regional economy within the medium term.

The 10th AFMIS served as a curtain raiser for the World Economic Forum on East Asia, which will also be held here in Manila May 21 to 23.




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