Asian bankers ready to tame economic woes

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Mon, 03/24/2008 1:10 AM  |  Headlines

Against the backdrop of a looming U.S. recession and global economic slowdown, central banks in the Asia-Pacific region have agreed to promote stronger intra-regional trade and tighter financial market supervision to soften the impact.

Nineteen central bankers met here Friday and Saturday at the 43rd Southeast Asian Central Banks (SEACEN) governors conference and the 27th SEACEN board of governors meeting to discuss the effect of a global economic slowdown on Asia-Pacific countries' monetary stability and economic growth.

The bankers said in a joint statement they "are hoping that intra-regional trade will provide some buffer against the likely slowing down of exports to the United States and Europe".

While the effect of the U.S. economic slowdown might be relatively low on Asian countries, they said, that could change if not addressed properly.

"We must absorb the impact by diversifying our trade to other Asian countries and increasing our domestic markets," they said.

Heng Swee Keat, managing director of the Monetary Authority of Singapore, told reporters after the meeting, "The fundamentals in most economies are better than they were in previous recessions".

The statement also highlighted the importance of boosting supervision of financial markets.

"Central banks must consolidate with each other to improve the existing supervision in numerous sectors."

The group said some SEACEN countries had shifted from a banking sector-driven financial system to a more sophisticated market-driven financial system.

The shift was expected to result in better risk diversification that would also help economies absorb external shocks.

"Financial deepening can absorb shocks in the financial market; however, it must be done in correct sequence," the group said.

If financial deepening is attempted without sufficient planning and supervision, the group added, there would be an excess of liquidity that may negatively impact the financial market.

Conference host Bank Indonesia said central banks in the region today faced potential risks posed by recent surges in short-term capital inflows.

Conference participants added that the International Monetary Fund (IMF) should improve its monitoring system to respond to the recent global economic challenges.

A U.S. economic slowdown, they said, would affect the EU and the rest of the world. The EU economy is predicted to slow down, followed by increasing inflation rates.

The United States is currently the world's biggest importer.

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