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Savings glut, financial integration in Asia Pacific
Among RCEP countries, Indonesia is actually well positioned to boost the financial integration agenda for three major reasons.
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US President Donald Trump steps off Air Force One at Andrews Air Force Base on May 7 in Maryland. (AFP/Brendan Smialowski )
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or the last decade, global imbalance issues related to countries’ current account deficits have emerged. Current account deficits result from a negative trade balance or negative return on a country’s position of net foreign assets. The more a country receives financial investment from other countries than it owns abroad, the higher the current account deficit it has.
This problem is referred to as a global savings glut, which initially occurred in the United States due to excess savings from emerging Asia investments in US risk-free assets prior to the 2007/2008 crisis.
Consequently, the US current account deficit reached its peak of 6.1 percent of gross domestic product in 2006. This level was much higher than other developed countries at the time and exceptional compared to US historical trends.
Such a gloomy experience has led US President Donald Trump to set overcoming the US current account deficit among his priorities. One of the steps undertaken by the US is the withdrawal from the Trans-Pacific Partnership (TPP) agreement. Despite the TPP reversal, the US is still likely to establish close cooperation with emerging Asian countries — especially those that form the Regional Comprehensive Economic Partnership (RCEP) — for the following reasons.
