Homepage
PR Newswire
26-10-2010, 06:16 AM
Business Times - 26 Oct 2010
Asia 'may need to coordinate currency policies'
Surging inflows may worsen inflationary pressures: IMF
By TEH SHI NING
(SINGAPORE) Asian economies may need to coordinate their currency policies and capital controls in the face of huge and potentially destabilising capital inflows, economists said yesterday at a discussion on the International Monetary Fund (IMF)'s latest Regional Economic Outlook for Asia and the Pacific.
'Ideally, we shouldn't have to use capital controls, but we're in a second-best world,' said panellist Manu Bhaskaran, CEO of Centennial Asia Advisors. A 'coordinated approach by Asia' to limit damage from the flood of liquidity pouring in would be far better than an 'uncoordinated dribbling out' of capital controls which has already begun, he said.
Surging capital inflows could exacerbate mounting inflationary pressures in Asia, according to IMF's latest report out last Thursday. At the Singapore launch of the report yesterday, IMF Asia and Pacific department director Anoop Singh said a better framework is needed to direct capital inflows into areas where investment is needed for sustained growth.
Outlining the risks and challenges for Asia, he said it is time for regional economies to normalise their monetary and fiscal policy stances, with growth set to continue, albeit with downside risks.
But panellist Sethaput Suthiwart-Narueput, chief economist and executive vice-president of Siam Commercial Bank, questioned the pace of interest rate normalisation and exchange rate appreciation being urged.
Given that capital inflows can only be sterilised to an extent, it will not make sense for Asian economies to raise interest rates quickly. And looking at the burden of export sectors that would be worst hit by currency appreciation, he thinks Asian economies will continue to have tightly managed exchanged rate policies for some time.
'If anybody should normalise interest rates, it should be the G-3,' which are pursuing policies of abnormally low interest rates, Mr Sethaput said.
Asian policymakers, he said, are now trying to patch holes in a wall when it is the burst pipe behind the wall that needs fixing. 'It can't be handled by any individual country, it requires coordination,' he said, adding that the upcoming G-20 summit may help address this issue.
Acknowledging concern over G-3 economies looking to their own interests in policy formulation, Mr Anoop said that IMF intends to produce 'spillover reports on the US, UK, Europe, China and Japan to examine the impact their policies would have on others'.
IMF has raised its Asia growth projection for 2010 to 8 per cent, though this is expected to moderate to 6.8 per cent next year.
It expects Singapore's GDP to grow 15 per cent this year - the upper end of the government's forecast - and 4.5 per cent in 2011.
Asia 'may need to coordinate currency policies'
Surging inflows may worsen inflationary pressures: IMF
By TEH SHI NING
(SINGAPORE) Asian economies may need to coordinate their currency policies and capital controls in the face of huge and potentially destabilising capital inflows, economists said yesterday at a discussion on the International Monetary Fund (IMF)'s latest Regional Economic Outlook for Asia and the Pacific.
'Ideally, we shouldn't have to use capital controls, but we're in a second-best world,' said panellist Manu Bhaskaran, CEO of Centennial Asia Advisors. A 'coordinated approach by Asia' to limit damage from the flood of liquidity pouring in would be far better than an 'uncoordinated dribbling out' of capital controls which has already begun, he said.
Surging capital inflows could exacerbate mounting inflationary pressures in Asia, according to IMF's latest report out last Thursday. At the Singapore launch of the report yesterday, IMF Asia and Pacific department director Anoop Singh said a better framework is needed to direct capital inflows into areas where investment is needed for sustained growth.
Outlining the risks and challenges for Asia, he said it is time for regional economies to normalise their monetary and fiscal policy stances, with growth set to continue, albeit with downside risks.
But panellist Sethaput Suthiwart-Narueput, chief economist and executive vice-president of Siam Commercial Bank, questioned the pace of interest rate normalisation and exchange rate appreciation being urged.
Given that capital inflows can only be sterilised to an extent, it will not make sense for Asian economies to raise interest rates quickly. And looking at the burden of export sectors that would be worst hit by currency appreciation, he thinks Asian economies will continue to have tightly managed exchanged rate policies for some time.
'If anybody should normalise interest rates, it should be the G-3,' which are pursuing policies of abnormally low interest rates, Mr Sethaput said.
Asian policymakers, he said, are now trying to patch holes in a wall when it is the burst pipe behind the wall that needs fixing. 'It can't be handled by any individual country, it requires coordination,' he said, adding that the upcoming G-20 summit may help address this issue.
Acknowledging concern over G-3 economies looking to their own interests in policy formulation, Mr Anoop said that IMF intends to produce 'spillover reports on the US, UK, Europe, China and Japan to examine the impact their policies would have on others'.
IMF has raised its Asia growth projection for 2010 to 8 per cent, though this is expected to moderate to 6.8 per cent next year.
It expects Singapore's GDP to grow 15 per cent this year - the upper end of the government's forecast - and 4.5 per cent in 2011.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/