Asia billed as driving force of world economy

TOKYO, Japan – The Bangko Sentral ng Pilipinas (BSP) and its regional counterparts all expect no quick solutions to problems in the Euro zone but remain convinced Asia will be the driving force of the global economy.

Emerging markets have agreed to fortify themselves by increasing areas for collaboration and mutual support, BSP officials said.

“The view is there are no quick solutions to the European problem and that the situation there, plus the situation of the US combined, remains gloomy,” BSP Governor Amando Tetangco Jr. said in an interview on the fringes of the International Monetary Fund-World Bank Annual Meetings here.

However, Asia remains a bright spot despite risks like low export demand and strong capital inflows.

“Asia continues to grow and it is providing a push to the global economy,” Tetangco said.

Continuing fiscal problems in the US and euro zone prompted the IMF to cut the growth forecast for the global economy to 3.3 percent this year and 3.6 percent next year, compared with 3.5 percent and 3.9 percent in the July outlook, respectively.

But Asia economy, in contrast, will likely grow 5.4 percent this year and 5.8 percent next year, the IMF said.

Tetangco said there was confirmation that the use of an enhanced policy toolkit remains appropriate.

It includes greater flexibility in exchange rate, the buildup in international reserves and macroprudential measures.

“They are also just like us, watchful of the potential impact and the risks that can arise from strong capital inflows with respect to asset prices and financial stability,” Tetangco said.

Moving forward, Asian economies need to cooperate to prevent volatile shocks from advanced economies.

For his part, BSP Deputy Governor Diwa Guinigundo said: “I think the important point is for us to fortify ourselves and increase our areas for collaboration and mutual support.”

Members of the Association of Southeast Asian Nations (ASEAN) are already moving towards a more meaningful approach to regional cooperation, Guingundo said.

Last week, BSP officials discussed key issues with counterparts in group meetings the South East Asian Central Banks, Executives’ Meeting of East Asia Pacific Central Banks and the ASEAN. –Neil Jerome C. Morales (The Philippine Star)