IMF Deputy Managing Director Naoyuki Shinohara speaks at AIM

The AIM Gov. Jose B. Fernandez Jr. Center for Banking and Finance, in coordination with the Philippine Representative Office of the International Monetary Fund (IMF), held a forum at AIM last November 4, 2011. The guest speaker was IMF Deputy Managing Director Naoyuki Shinohara, who gave a lecture on “Asia-Pacific Regional Economic Outlook: Navigating an Uncertain Global Environment.”

According to Mr. Shinohara, the global economy is in a dangerous phase, with a weaker outlook for growth and rising risks. Negative feedback loops between the real economy and the financial sector have arisen. Moreover, unemployment in advanced economies remains very high. The perspective is a little different in Asia, but Asia is also vulnerable to the developments in other regions, especially through the trade channel. Emerging Asia is not immune from a risk of financial contagion, either.

Mr. Shinohara’s conclusions emphasized key policy challenges against the current background of heightened global uncertainty. He said:
 

• “The Eurozone leaders have taken steps toward addressing the crisis in their countries, but important details that still need to be elaborated, and implementation will be key. Until then the risks of adverse feedback loops from deteriorating global economic and financial conditions will remain very real. Policymakers must build on recent positive progress in Europe to decisively forestall a downward spiral of unsustainable debt dynamics, dysfunctional financial markets, falling demand, and rising unemployment. At the same time, in the US, important policy steps are needed to repair household balance sheet, which is key to that country’s full economic recovery.

• “The main challenges for Asian policymakers going forward are to support activity in a fragile global setting, while ensuring that growth is of the right ‘quality.’ The renewed weakness in advanced countries highlights the need to rebalance to reduce vulnerability. Policies to do so will also lead to more equitable growth.

• “In the near term, against the backdrop of unusual uncertainty, a pause in the pace of tightening may be warranted in countries where inflation and, more generally, overhearing pressures are under control. Allowing stronger exchange rates would give more room to monetary policy to pause, as it would help contain remaining inflationary pressures, but would also help rebalancing growth by sustaining domestic demand.”

The forum was attended by executives from the business and government sectors as well as economic-oriented NGOs and management associations.