Sunday, August 16, 2009

Asia to emerge stronger

Source: Straits Times Aug 6, 2009
By Alvin Foo

THE worst of the crisis seems to be over for Asia, which will emerge stronger owing to its sound fundamentals, said Government of Singapore Investment Corp (GIC) deputy chairman and executive director Tony Tan on Thursday night.

He sounded a cautiously upbeat message at the annual Economic Society of Singapore dinner, noting that the crisis also presented opportunities for Asian financial institutions and markets.

'The worst seems to be behind us in Asia. Asian economies are now expected to see continued improvement through 2010,' Dr Tan said at the dinner held at Swissotel The Stamford.

While cautiously optimistic in the short term, he also warned of possible risks and challenges to recovery, such as trade protectionism and a global environment which does not stabilise and recover by next year.

In July 2007, at another event, Dr Tan spoke of dark clouds on the horizon for financial markets. In April last year, well before the financial mayhem that erupted in September, he warned the world could be facing its worst recession in 30 years.

On Thursday night, he said the region would emerge from the crisis in a better position, and reorientate itself to ensure more balanced and sustainable development.

'Asia's fundamentals are generally sound, policy-makers have lots of flexibility, and the population is hard-working and educated,' said Dr Tan.

The economic downturn has presented regional financial institutions and markets with 'tremendous opportunities over the next decade', he noted.

This is because Western banks will probably be unable to meet the capital demand needed to finance Asia's growth due to constraints and re-regulation.

'This leaves the playing field unusually open for Asian financial institutions and markets, particularly for the next three to five years,' he said.

However, regional banks and markets will need to develop quickly to fill this gap, he added. Other implications of the crisis for Asia are the volatile capital flows and asset bubbles which policy-makers will face due to ample liquidity and low interest rates.

'Like in the early 1990s, managing large capital inflows and prospective bubbles given managed exchange rates will be a major task for policy-makers,' said Dr Tan

a blog on: Financial Planning Advice - Christopher Pua

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