Asian nations are more prepared to face global economic shocks after they strengthened domestic demand and financial systems since the 1997-98 regional crisis, said Malaysian central bank Governor Zeti Akhtar Aziz, a veteran of that turmoil.
Asia is in a “better state of readiness” to face shocks as policies geared toward strengthening domestic demand anchor growth prospects, Zeti, 64, said in a speech in Jakarta today. Her confidence echoes the sentiment of policy makers across the region, with China saying its economy is heading for a rebound this month and Indonesia saying this week that its banks are still growing amid Europe’s woes, underscoring domestic strength.
Malaysia’s economic expansion has stayed above 4 percent since it emerged from a recession in 2009, as rising public spending and a yearlong pause in interest-rate increases countered Europe’s debt crisis and a faltering US recovery. Zeti, who oversaw the country’s capital controls in response to the Asian crisis, has guided monetary policy in the Southeast Asian nation through regional health epidemics, natural disasters and the last global slump.
“Asia is consuming more and more,” Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore, said yesterday. “Its domestic demand is contributing to global growth and driving its own growth.”
Much of the region has grown through the persistent European sovereign-debt crisis, Japan’s tsunami and the disruption to manufacturing from Thailand’s floods last year, even as stocks and currencies slid in recent months on concern weakening global demand will hurt Asian exports.
Indonesia, which turned to the International Monetary Fund for a bailout and spent 450 trillion rupiah ($47 billion) to rescue lenders during the Asian financial crisis, has seen growth exceed 6 percent since 2010. Lending growth in Southeast Asia’s biggest economy was an annual 28 percent pace in May, Bank Indonesia Deputy Governor Muliaman Hadad said June 19.
China’s Commerce Minister Chen Deming said this week his nation’s economy is “turning for the better,” in June following government measures to support growth, adding to signals of confidence among officials that the slowdown is ebbing. The comments added to remarks by President Hu Jintao that China will “maintain steady and robust growth.”
The comments signal confidence amid escalating global risks. Asian stocks fell today and the Indian rupee slid to a record low as manufacturing and jobs reports added to signs of a US economic slowdown. The MSCI Asia Pacific Index declined 1 percent as of 1:40 p.m. in Tokyo.
Taiwan’s unemployment rate rose for the second straight month in May, a report showed today. Industrial production probably fell for a third month, a Bloomberg survey of economists showed before data due today. Malaysia may say inflation eased, a separate survey showed.
In Europe, German business confidence probably fell to the lowest in more than two years in June and consumer confidence in Italy probably slid this month, according to Bloomberg surveys.
Asia’s growth prospects are being supported by a shift from being a producer to consumer, with a middle class that is projected to increase from 500 million to more than 3 billion by 2030, Zeti said today.
“Distinct strategies have been implemented to strengthen further the macroeconomic fundamentals and financial system soundness in the region,” Zeti said. “These stronger foundations of steady growth, low unemployment, relatively low inflation, and strong and more developed financial systems, have strengthened Asia’s resilience and its ability to manage external vulnerabilities.”
Zeti was assistant central bank governor responsible for economics, reserves management, money market and foreign exchange operations when Thailand devalued the baht on July 2, 1997. The ringgit fell 89 percent in the next six months as regional currencies plunged and investors fled the region, pushing Asian economies into recession and prompting Thailand, Indonesia and South Korea to turn to IMF bailouts. It was Zeti who announced Malaysia’s capital controls in 1998 as acting governor, drawing the ire of the IMF.
The first Malaysian woman to become central bank governor, Zeti obtained a doctorate in economics from the University of Pennsylvania in 1978, with a thesis focusing on international capital flows and their implications for macroeconomic policies.
Bank Negara Malaysia kept the benchmark overnight policy rate unchanged at 3 percent for a sixth straight meeting on May 11, joining Indonesia and Thailand in holding borrowing costs steady in recent months.
The $238 billion economy expanded 4.7 percent in the first quarter from a year earlier, after a 5.2 percent pace in the previous three months.