United Nations, New York Dec 9, 2014 By Tarisa Watanagase 1 - PowerPoint PPT Presentation

United Nations, New York Dec 9, 2014 By Tarisa Watanagase 1

Output loss Output loss Fiscal cost Fiscal cost Increased in Increased in Peak NPLs Peak NPLs (%of trend (%of tre d (% of GDP) (% of GDP) public debt public debt (% of total (% of total GDP) GDP) (% of GDP) (% of GDP) loans) loans) Thailand 109.3 43.8 42.1 33 Malaysia 31.4 16.4 0.2 30 Indonesia 69 56.8 67.6 32.5 Korea 57.6 31.2 9.9 35 2

Growth % Inflation Credit Cur a/c FX to External debt imports, growth % to GDP % % to exports % month Indonesia 7.6 8.6 20.7 ‐ 2.4 214.7 3.1 Japan 5.2 1.1 10.8 3.2 … 3.4 Korea 7.4 5.3 19.8 ‐ 1.2 77.6 2.2 Malaysia 9.6 3.8 … ‐ 6.0 44.3 … Thailand 8.1 4.8 25.0 ‐ 6.3 132.6 5.1 Indonesia 5.1 9.7 22.4 2.5 162.5 5.3 Japan 1.8 0.0 ‐ 1.0 3.9 230.3 15.0 Korea 6.7 2.7 6.2 2.7 69.4 6.3 Malaysia 5.4 1.5 5.2 9.7 41.1 4.5 Thailand 5.1 2.2 6.3 1.8 62.9 4.9 3

1. Avoid boom-bust cycle. Sustainable growth in line with country’s economic potential much more stable and desirable 2. Central bank must pursue dual mandates of price stability and financial stability Avoid accommodative monetary and fiscal policies over extended • period, which are sources of inflation/ bubbles/ imbalances threatening economic stability. Dampen sectoral overheating with macro-prudential measures but • overall overheating must be dealt with tightened economic policies 4

3. Maintain policy space for conventional policies. • impact of unconventional monetary policy not clear but potentially very costly • huge fiscal spending usually needed for financial sector cleanup • Fiscal policy more effective in reviving a post- crisis economy 5

Maintain resilience amid global integration/ 4. volatilities, esp. small economy. Promote awareness of sustainability and risk management of general public for sustainable corporate and household debts Understand and mitigate systemic risks of banking 5. sector Policy makers must be prepared to take away the 6. punch bowl when needed . 6 7.

• capital flows and price and financial stability: MP less effective, risk of financial imbalances increases • Design of institutional setup, framework for effective monitoring and assessment of systemic risk, domestically and internationally • Effective international mechanisms for prevention of crisis. Mandatory FSAP for systemically important countries?, 7

• Implementation of financial stability measures: how to define, identify, measure, analytical capacity building • Governance structure to mitigate risks to central bank interference from financial stability mandate 8