MANILA, Philippines – World policymakers have highlighted the resilience of emerging markets in the past year, but warned nobody is “decoupled” from the fragile global economic environment and that buffers must be built up to ensure sustainability.
The six-day annual meetings of the World Economic Forum in Switzerland ended yesterday with nations aware of more challenges ahead as Europe and US solve their debt crises that have reverberated throughout the global economy.
“I think we need to be careful with decoupling in general. Countries have specific needs and we need to be attentive to that,” said Christine Lagarde, managing director of the International Monetary Fund (IMF), in a forum held during the meetings.
Progress has been made in addressing developed markets’ woes, she claimed, but until such time growth has been achieved, maintaining “fiscal space” and “rebuilding buffers” should be undertaken by emerging nations such as the Philippines.
“And for some of those emerging countries, they need to focus on being domestically oriented… and that they are bringing in more investments and becoming less export driven,” she added.
IMF has predicted the 17-nation eurozone bloc to fall into recession this year while the US is expected to post a dismal two-percent growth, according to its World Economic Outlook released last week. This is in contrast to emerging markets, which are forecast to grow 5.5 percent.
Business ( Article MRec ), pagematch: 1, sectionmatch: 1 The Philippines, in particular, is seen to grow faster at six percent, a revision from the IMF’s October outlook of 4.8 percent. For 2012, growth could have come in at 6.5 percent, above government targets.
This however does not mean decoupling has emerged since countries where growth have been sustained has seen capital inflows rise, causing currency appreciation pressures, said Jose Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development.
In response, central banks in countries experiencing capital flow volatility have unveiled measures targeted at tempering speculative money.
“There is a certain legitimacy to defend yourself from the onslaught (of capital flows). The question is where you draw the line,” Gurria pointed out.
Amid an influx of capital, the Bangko Sentral ng Pilipinas has put up macroprudential measures since last year, including a ban on foreign funds in special deposit accounts and expanded real estate exposure computation for banks. –Prinz P. Magtulis, Philippine Star
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