Asian economies resilient enough to endure turbulence: IMF
ASIAN economies are resilient enough to ride out turbulence, International Monetary Fund (IMF) economists said, underscoring the importance of taking turmoils in stride at a time when the region faces various internal risks, in addition to Donald Trump’s return to the White House.
Asia remains a key engine of global economic growth, but this year it has seen a rise in uncertainties that span a range of factors. Japan’s surprising leadership transition, South Korea’s bungled martial-law command, and the threat of tariffs from Trump have made the future harder to predict in the region.
While declining to comment on specific countries and political situations, IMF Asia-Pacific division chief Alasdair Scott highlighted the resilience of the region, and said it maintains a great deal of upside growth potential.
“We have already seen actually that there is that resilience,” he said on Monday (Dec 9), after earlier pointing to the brevity of the August market turmoil that followed the Bank of Japan’s July rate cut.
There are challenges to navigate, including longer-term issues such as demographics and labour, but “there’s lots of upside growth potential”, he said.
Scott and Johannes Wiegand, chief IMF economist for Asia-Pacific, are visiting Seoul this week to attend a joint conference with the Korea Institute for International Economic Policy on Trump and the world economic outlook.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The latest event rocking the region has been a martial-law debacle in South Korea that sparked an opposition campaign to impeach President Yoon Suk-yeol. Yoon has apologised for his decree on Dec 3 that lasted several hours, and has since left state affairs in the hands of the prime minister and the ruling party.
The won depreciated as much as 1.1 per cent against the US dollar on Monday, after South Korea’s parliament failed to pass an impeachment motion against Yoon over the weekend. The opposition plans to push for another motion later this week.
The Kospi stock index fell as much as 2.8 per cent on Monday in one of the biggest slides since August, when an unexpected interest rate hike by the Bank of Japan sent markets tumbling across the region.
“We have seen momentary episodes of turbulence, like in early August when the Topix market decreased very rapidly,” the IMF’s Scott said. “But you come back to it a week or two later and things have come back. So on our side, we are trying to take a longer point of view.”
The Bank of Korea (BOK) has stepped up its measures to stabilise markets since the martial-law row erupted, and pledged “unlimited liquidity” if necessary in coordination with the government. BOK governor Rhee Chang-yong, however, has dismissed the chance of cutting the benchmark interest rate just to limit the impact from the political turmoil.
The IMF’s Wiegand agreed the region has “displayed remarkable resilience” and expects it to continue to do so.
He also said there was “ample room” by Asian central banks to cut rates further as consumer inflation slows, with the Federal Reserve also seen as planning to ease its own monetary policy. The exchange rate serves as a “shock absorber” and nations should try to make use of it as such, he said.
“Asian economies have developed so much and seem to be so much more resilient than they used to be” during the financial crisis of the late 1990s, Wiegand said. BLOOMBERG
Share with us your feedback on BT's products and services
