BUSAN — Increasing trade protectionism, tightening financial conditions and the new technological revolution have posed growing risks and challenges to the ASEAN+3 region. To address these risks, appropriate policy measures should be undertaken and the regional financial safety net centered around the Chiang Mai Initiative Multilateralization (CMIM) should be enhanced.
These issues were discussed today at the ASEAN+3 Financial Forum (ATFF) 2018 with the theme “Voyage in Growing Uncertainties,” organized by the ASEAN+3 Macroeconomic Research Office (AMRO). The forum was held back to back with the ASEAN+3 Finance and Central Bank Deputies’ Meeting in Busan, Korea.
“The global economy is presently at a crossroad, clouded by uncertainties around the international trading regime and tightening financial conditions, led by US monetary policy normalization,” said AMRO Director Dr. Junhong Chang in her opening remarks. “Policymaker in the ASEAN+3 region should continue undertaking preemptive measures and work together to enhance the regional financing arrangement in anticipation of possible future crises.”
As the co-chairs of AMRO’s executive committee for 2018, Weon-Kyoung Jo, director general for G20, IMF and ASEAN+3, International Finance Bureau, Ministry of Economy and Finance, Korea and Ping Yi Yee, deputy secretary (Planning), Ministry of Finance of Singapore, delivered keynote addresses at the forum. Discussants and speakers included high-level policy makers, renowned academics and economists who have strong background and experience on the East Asia region.
In the first session moderated by AMRO Chief Economist Dr. Hoe Ee Khor, panelists discussed how economies in the region should respond to the increasing global economic uncertainties and disruptive changes brought about by digital technology and automation.
The panelists agreed that going into 2019, external risks to the region from US-China trade conflicts and tighter global financial conditions remain elevated, and the region should be vigilant. While AMRO has maintained its 2018 growth estimate for the region at 5.4 percent, it has shaded down its baseline growth forecast for 2019 to 5.1 percent, with a significant downside risk.
Estimates by AMRO of the impact of the US-China trade conflicts show that regional growth could be reduced by 0.1 to 0.3 percentage point in a baseline scenario and by as much as 0.2 to 1 percentage point in a worst-case scenario assuming a further escalation of the trade conflict.
The panelists noted that while the region has benefited from capital inflows, emerging markets that rely on external financing would face increased debt servicing burdens as financing conditions tighten, and risks of large capital outflows. They also discussed challenges to regional economies from new technologies of robotics, automation, digitization and Internet of things, which can lead to disruptions in the traditional business models and job markets.
To address these risks and challenges, the panelists emphasized the need to remain vigilant, with no room for complacency. Policy measures should continue to be preemptive, frontloaded and ahead-of-the-curve
The appropriate policy mix of monetary, fiscal, macroprudential, and structural policies will have to be calibrated according to the circumstances of each individual economy. Panelists were also of the view that the region should embrace the new technologies in order to remain competitive and move up the value chain but to put in place measures to mitigate the disruption to businesses and workers.