Asia bankers meet amid fears over slowdown

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Sat, 03/22/2008 1:42 PM  |  Headlines

Central banks from 19 countries in the Asia-Pacific region are meeting here Friday to Sunday to discuss the global economic slowdown and its impact on monetary stability and economic growth throughout the region.

"We must work to secure macroeconomic stability and sustain economic growth amid the global economic slowdown," Bank Indonesia (BI) Governor Burhanuddin Abdullah told a press conference Friday.

Burhanuddin is acting as the chairman for the Southeast Asian Central Banks (SEACEN) meeting. The meeting is the 43rd SEACEN governors conference and the 27th SEACEN board of governors meeting.

Burhanuddin said central banks in the region needed to cooperate to anticipate external shocks coming from the United States, the world's largest economy, and the surge in oil and commodity prices.

It has been speculated the United States will enter a recession following the subprime mortgage crisis. At the same time, the prices of oil and some commodities have reached record highs this year.

In his opening speech, Burhanuddin said central banks in the region today were facing potential risks posed by recent surges of short-term capital inflows.

Before the crisis, he said, capital inflows were mainly prompted by domestic market actors obtaining foreign financing through international bank loans and other issuances.

"Today, foreign capital inflows originate from the flush of global liquidity, in search of optimum rates of return amid the weakening global economic growth," said Burhanuddin.

He said recent portfolio capital inflows had scarcely benefited the economy, other than in strengthening domestic currency and aiding in the boom of the capital market.

Many investors have shifted their funds from capital and financial markets to commodity markets, with the volatility of stock markets and the U.S. dollar deemed the cause.

"Financial deepening is needed to absorb shocks in financial markets," BI Deputy Governor Hartadi A. Sarwono told reporters.

"Cooperation between SEACEN is crucial so that we are not too dependent on the United States," he said.

Coordinating Minister for the Economy Boediono said in his speech that by grouping, SEACEN could develop the countries' domestic financial sectors more efficiently and make them more resilient to shocks.

"An efficient and robust financial system can enhance long-term growth prospects," Boediono said.

Regarding the country's economy, Hartadi said BI would focus on both economic growth and inflation targets.

However, BI believed economic growth would go according to the government's plan, leaving BI more concerned with inflation.

Indonesia's economy is forecast to grow by 6.2 percent this year, with the inflation rate close to 6.8 percent. Last year, the GDP growth was 6.3 percent, with 6.6 percent inflation.

The Philippines' central bank governor Amando Tetangco said he was optimistic about his country's economy amid the global economic slowdown.

"We try to keep inflation well-anchored," he said.

The Philippines targeted the economy to grow by between 6.3 and 7.0 percent this year, lower than the 21-year high last year of 7.3 percent.

It also targeted a full-year inflation rate of 3.5 percent. In the first two months this year, inflation has reached 5.4 percent.

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