Speech by AMRO Director Toshinori Doi
Virtual 18th East Asia Forum
December 10, 2020
Strengthening ASEAN+3 Cooperation for Economic and Financial Resilience in the Face of Emerging Challenges

(As prepared for delivery)

  1. Thank you, Dr. Nguyen.
  2. On behalf of the ASEAN+3 Macroeconomic Research Office, or AMRO in short, thank you for inviting us to the 18th East Asia Forum.
  3. AMRO is an international organization that conducts macro-financial surveillance of the ASEAN+3 economies. We also provide operational support to the Chiang Mai Initiative Multilateralisation, or CMIM, which is the regional financial safety net.
  4. This morning, I would like to give an update on the economic impact of the COVID-19 pandemic on our region, as well as provide an overview of ASEAN+3 members’ efforts to ensure economic and financial growth and stability.
  5. It has been almost a year since the outbreak of the coronavirus. Although member economies are still experiencing a resurgence of infections, the situation remains relatively contained compared to the rest of the world. Our region is home to around 30% of the global population but only accounts for around 2% of the coronavirus cases. Last month, Bloomberg published an article on economies that have best tackled the pandemic by looking at how they contain the virus and safeguard the quality of life. According to Bloomberg’s COVID resilience ranking, out of the 20 best places to be in during the coronavirus era, eight were ASEAN+3 economies.
  6. Nevertheless, economic activity in this region has been just as badly hit by the pandemic. All the economies in the ASEAN+3 region experienced sharp declines in GDP growth in either the first or second quarter of this year as a result of stringent containment measures. AMRO estimates a contraction of 0.3% for the region in 2020, with nine of our 14 members expected to post negative growth, which is quite unprecedented.
  7. Looking back, this region was severely impacted by the economic fallout from the 1997 Asian financial crisis. Since then, regional policymakers have built up policy buffers and reserves to protect their economies against unforeseen shocks. In addition to allowing greater exchange rate flexibility, they worked hard to balance their current accounts, strengthen their foreign exchange reserves, and adopted prudent financial, fiscal, and monetary policies.
  8. This time, when the pandemic struck, policymakers in the region moved swiftly to mitigate the shock to their economies. In addition to strengthening their healthcare systems, extraordinary measures have been deployed to support households, businesses, and the financial system. The size of the stimulus packages ranges from 10 to 40% of GDP across ASEAN+3 economies, depending on the available policy space.
  9. In the near term, the biggest challenge facing policymakers in the region is to balance the trade-off between restoring growth and preserving policy space. The eventual phasing-out of stimulus and forbearance measures needs to take into account the strength of the recovery and remaining uncertainties; because an early withdrawal could lead to potential cliff effects while overextending the safety net could harm fiscal sustainability, and create moral hazards in the financial system.
  10. Over the medium term, a strong commitment to rebuilding policy space is critical for maintaining policy credibility. The return to fiscal consolidation and the unwinding of extraordinary monetary measures after the pandemic will be crucial for regaining market confidence. As the post-COVID-19 world will be different, in order to thrive, our future economy must cater to structural shifts, such as the adoption of digital technology and the growing emphasis on sustainability.
  11. As the global economy and financial system become more interconnected, disruptions to supply chains and greater risks of financial spillovers and contagion have highlighted the importance of strengthening the region’s buffers against macro-financial shocks.
  12. In this regard, ASEAN+3 members continue to work together to strengthen the effectiveness and operational readiness of the CMIM. Recently in September, ASEAN+3 members reached another milestone agreement to increase the IMF De-linked portion and to allow the use of local currency.
  13. Let me wrap up. The lessons learned from the Asian financial crisis have motivated policymakers in the region to strengthen the resilience of their economies and financial systems. Efforts to build up financial buffers and implement sound macroeconomic policies, and the commitment to open, inclusive and rules-based multilateral trade have allowed our region to withstand the pandemic shocks, with a V-shaped recovery already underway.
  14. Thank you.