Experts warn governments ASEAN needs structural reforms to sustain growth

CEBU, Philippines - Although Asia was able to prove its economic resilience while the world’s most advanced economies suffered a slowdown, financial experts nonetheless cautioned the region to be ready with sound structural reforms.

This recommendation was raised during the Official Monetary and Financial Institutions Forum (OMFIF) Debate hosted by the Bangko Sentral ng Pilipinas at the Shangri-La’s Mactan Resort and Spa. The meeting was one of the opening events of the ASEAN 50 Summit hosted by the Philippines this year.

As to how the ASEAN bloc will be able to sustain such resilience amid the ‘new mediocre’ trend among giant economies, the financial geniuses said it all boils down on how each government in the region will be able to respond against the external economic poisons.

New mediocre refers to a phase of relatively slow growth for a long period, a trend that is clearly happening in the western economies like United States, European Union and the United Kingdom.

And while Asia has been dubbed as the economic ‘future of the world,’ it is not completely immune to this global trend and that governments in the region should be conscious on how to protect each country's economic muscle at the same time learn to be self-sufficient.

For instance, few of the most important actions to be taken by governments in the region is to beef up their respective productivity level, innovation, research and development, technology, improving the skills of labor pool, infrastructure, and reforms in education, suggested Terisa Watanagase, former governor of the Bank of Thailand.

Watanagase, who is one of the panelists of the BSP-OMFIF Debate, said Asia in general is vibrant and the integrated ASEAN as well is following a long term growth path. But its weaknesses should be dealt with intellectually.

Economics professor Danny Quah, of the Lee Kuan Yew School of Public Policy, also believes that the region needs a perfect balance for it to be spared from the ‘new mediocre’ trend.

Quah warned that the reign of US President Donald Trump, the Brexit movement, the peculiar slow growth of UK, are disrupting the world. Thus, Asia should be extra careful.

The strong protectionism adapted by powerful economies also poses danger to Asia's growth path, Quah added.

While Asia is growing three times more than the west, Asia should see both ends of the opportunity – pushing inclusive economic without losing its trade relationships with outsiders.

"We have to be extremely balanced, if we were to escape the 'new mediocre' track," advised Quah.

Likewise, BSP governor Amado M. Tetangco, Jr., said Asia, like the rest of the world, suffered significant impact from the GFC. But it proved to be resilient.  Empirical evidence shows that, relative to the rest of the world, the depth of the output decline in Asia was smaller by almost three percentage points and the cumulative output loss was lower by 11 percent of annualized GDP in the third quarter of 2008.

Ironically though, Asia’s resiliency during the Global Financial Crisis is founded on another crisis.

"The 1997 Asian Financial Crisis shaped the key financial, structural and institutional reforms that defined Asian economies in the decade following the crisis," said Tetangco, who has been named as one of the world's best central bankers.

Tetangco also agreed with the rest of the panelists, saying the emerging challenges in the global economy will continuously test the resilience of Asia.  Asia’s ability to withstand these shocks will crucially depend on the structural reforms and proactive policies that it will undertake in key areas. A misstep in this direction and Asia may also become the “new mediocre”.

Other panelists during the over two-hour debate were BSP board member Felipe Medalla, London School of Economics and political science professor Lord Meghnad Jagdishchandra Desai. (BANAT NEWS)