TOP monetary authorities in Southeast Asia are in the country to compare notes and discuss strategies for financial stability, marking a new regional initiative to strengthen standards and prevent future crises.
Representatives of member-states of the Association of Southeast Asian Nations (ASEAN) are attending a regional dialogue organized by the Bangko Sentral ng Pilipinas (BSP) and the International Monetary Fund (IMF), with the goal of threshing out policy proposals a decade after the Global Financial Crisis of 2007-2008.
An “informal” regional network was also created yesterday, led by Bank Negara Malaysia Governor Datuk Nor Shamsiah Mohd Yunus and Bank Indonesia Governor Perry Warjiyo.
The IMF, World Bank, the Bank for International Settlements and the South East Asian Central Banks Research and Training Centre also took part in two-day dialogue which ends today.
‘NO LONGER… THE OLD NORMAL’
“The realization from 2008 was that we needed to re-assess our framework and our models,” BSP Deputy Governor Chuchi G. Fonacier said in a speech during the opening ceremony held at the Philippine International Convention Center in Pasay City on Monday.
“Stress points in the financial market are not simply auxiliary issues. Instead, they require our direct attention.”
Back then, excessive lending gave way to massive credit defaults which in turn triggered the collapse of big banks that ultimately caused recession worldwide.
“The breadth and depth of the Global Financial Crisis make financial stability impossible to disregard. This is true even for ASEAN despite its not being a direct party to the build-up of risks and the eventual materialization of the vulnerabilities,” the central bank official said, reading remarks on behalf of BSP Governor Nestor A. Espenilla, Jr.
Tasks include coming up with a common understanding of financial stability, the BSP official said, as well as a change in attitude among regulators in terms of addressing market volatility.
“[T]he previous economic orthodoxy looked at financial market volatilities as being fully subsumed under the management of the macroeconomy. For as long as the macroeconomy was growing and stable, financial market imbalances were only temporary and expectation was that the market would eventually return to the normal state,” Ms. Fonacier said.
“At the very least, we can no longer afford the old normal under the previous orthodoxy. We cannot take the financial market as a passive add-on to the macroeconomy. Rather we must view it as one that can directly cause systemic risks.”
In her remarks in the same meeting, IMF Deputy Director Ratna Sahay said the dialogue seeks to come up with “forward-looking” risk assessments to mitigate future risks, while sharing tools and lessons specifically for Southeast Asia.
GLOBAL GROWTH SLOWING
In a separate development on Monday, the IMF expects an even slower global economy this year as risks continue to hound the outlook.
The IMF’s World Economic Outlook report projects global output to expand by 3.5%, slower than the 3.7% projected for 2018.
The forecast is also two percentage points lower than the previous estimates published in October.
“The further downward revision since October in part reflects carry over from softer momentum in the second half of 2018… but also weakening financial market sentiment as well as a contraction in Turkey now projected to be deeper than anticipated,” the report read.
“Risks to global growth tilt to the downside. An escalation of trade tensions beyond those already incorporated in the forecast remains a key source of risk to the outlook. Financial conditions have already tightened…”
The easing growth momentum is due to a “persistent decline” in the growth rate of advanced economies, as well as a slowdown among emerging markets due to the impact of persistent trade tensions between China and the United States.
By 2020, global growth is pegged to slightly recover to 3.6%.
Growth is seen better for the ASEAN-5 consisting of the Philippines, Indonesia, Malaysia, Thailand and Vietnam. The estimate is pegged at 5.1% this year and 5.2% in 2020, but will be tested by “difficult external conditions” as observed in recent months. — Melissa Luz T. Lopez

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