Southeast Asian economies must remain vigilant given changing global economic conditions, particularly a slowdown among emerging economies and a First World recovery, lower commodity prices and interest rate hikes.
Central bankers noted heightened uncertainties for growth and financial stability in the region during a gathering last week in Manila, where the Bangko Sentral ng Pilipinas hosted the 51st Conference and High-level Seminar of the Governors of the South East Asian Central Banks (SEACEN) and 35th Meeting of the group’s Board of Governors.
The central bankers, who met from November 25 to 27, said enhancing economic resilience would require, among others, a deeper appreciation of the changes taking place in the global environment.
These changes, they said, have been seen via three major facets:
• an economic growth slowdown in some emerging market economies as advanced economies start to recover;
• a stable global oil supply, coupled with an overall weakening of demand, has taken its toll on commodity prices, thus dampening the growth prospects of commodity-exporting economies; and
• the apparent inevitable normalization of monetary policy in some advanced economies, particularly the United States, that is expected to alter financial conditions facing emerging economies.
“Governors noted that the shifting dynamics of global economic conditions have given rise to increased uncertainty for SEACEN economies, particularly in two aspects — growth and financial stability,” the central bankers said in a statement issued following the gathering.
They recognized that risks to growth would be transmitted mainly through trade, while risks to financial stability would propagate through exchange rates, interest rates and capital flows.
“Given these multiple and highly-interrelated channels of transmission, there is a need to maintain vigilance by clearly identifying and managing risks and various points of vulnerabilities and how these might feed their way into the real sector,” the central bankers said.
At the end of the conference, they said it would be prudent for SEACEN-member economies to focus on enhancing domestic sources of resilience.
They highlighted that the pursuit of wide-ranging policy reforms should be a continuing process to cope with episodes of global economic stress.
“Building resilience will also entail the expansion and careful coordination of policy instruments to address the multiple objectives of financial stability and promoting macroeconomic stability to help sustain strong growth,” the central bankers said.
To enhance effectiveness, policy options and objectives need to be carefully communicated to the public, they added.
The central bankers also highlighted the need to reform the international monetary system and emphasized the role of international institutions in addressing regional as well as global issues and challenges.
They called for stronger regional and international policy dialogue and collaboration during both normal and challenging times, particularly in the areas of improving surveillance and strengthening of safety nets.
In another development, the SEACEM Board of Governors also welcomed the organization’s new executive director, Hans Genberg, who assumed office in July.
The governors also reviewed the progress of 2015 initiatives and proposed plans for the SEACEN Center in light of ongoing organizational changes.
“One of the major changes in SEACEN operations is the new funding model approved by the governors which will take effect in 2016,” they noted.
“With the organizational transformation of the SEACEN Center, the governors look forward to a more effective establishment of the SEACEN brand in the coming years,” they added.