Vigilance needed to combat economic uncertainty – SEACEN

MANILA, Philippines - Central banks in Southeast Asia vowed to focus on enhancing domestic sources of resilience to combat increased uncertainty in the region, particularly in terms of growth and financial stability.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. led the opening of the 51st Conference and High-level Seminar of the Governors of the South East Asian Central Banks (SEACEN) and 35th meeting of the SEACEN Board of Governor hosted in Manila last week.

During the conference, central bank governors noted the shifting dynamics of global economic conditions has increased uncertainty in the region’s economic growth.

Likewise, they said the risks to economic growth in the region could be transmitted mainly through the trade channel, while risks to financial stability may be propagated through the exchange rate, interest rates and capital flows channels.

“Given these multiple and highly-interrelated channels of transmission, there is a need to maintain vigilance by clearly identifying and managing risks and various points of vulnerabilities, and how these might feed their way into the real sector,” the central bank governors stated in a press communique.

The risk factors include the slowdown in economic growth in some emerging market economies while advanced economies have started to recover, as well as the dampening the growth prospects of commodity-exporting economies amid the stable global oil supply coupled with the overall weakening of global demand that continues to take their toll on commodity prices.

The central bank governors also cited the apparent inevitable normalization of monetary policy in some advanced economies, particularly in the US, that is expected to alter financial conditions facing emerging market economies.

During the open discussion, the governors shared the view that enhancing economic resilience would require, among others, a deeper appreciation of the changes taking place in the global environment.

As a result, governors deliberated it is prudent for SEACEN  – member economies to focus on enhancing domestic sources of resilience.

“Toward this end, the governors highlighted the pursuit of wide-ranging policy reforms should be a continuing process for SEACEN economies to cope with episodes of global economic stress,” the governors added.

They agreed that building resilience would entail the expansion and careful coordination of policy instruments to address the multiple objectives of financial stability and promote macroeconomic stability to help sustain strong growth.

“To enhance the effectiveness of these policies, the policy options and objectives need to be carefully communicated to the public,” they said.

The central bank governors also highlighted the need to reform the international monetary system and emphasized the role of international financial institutions in addressing regional as well as global issues and challenges.

They collectively called for stronger regional and international policy dialogue and collaboration during both normal and challenging times, particularly in the areas of improving surveillance and strengthening safety nets.

The 20 SEACEN members include Autoriti Monetari Brunei Darussalam; National Bank of Cambodia; People’s Bank of China; Reserve Bank of Fiji; Hong Kong Monetary Authority; Reserve Bank of India; Bank Indonesia; The Bank of Korea; Bank of Lao PDR; Bank Negara Malaysia; The Bank of Mongolia; Central Bank of Myanmar; Nepal Rastra Bank; Bank of Papua New Guinea; Bangko Sentral ng Pilipinas; Monetary Authority of Singapore; Central Bank of Sri Lanka; Central Bank, Chinese Taipei; Bank of Thailand; and State Bank of Vietnam.

The Central Bank of Myanmar will host the 52nd SEACEN Governors’ Conference and 36th Meeting of the SEACEN Board of Governors next year.