 "Michael Patra")
Asia will continue to stay on course with disinflation, and signs are pointing towards alignment with central bank targets, said Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra.
While speaking at the 59th Southeast Asian Central Banks (SEACEN) Governors’ Conference on February 15, the text of which was released by the RBI on Tuesday, he said, “Overall, Asia will likely contribute about two-thirds of global growth in 2024, a carryover of its blockbuster performance in 2023. Another noteworthy development is that disinflation is expected to remain on track in Asia, and convergence with central bank targets is being sighted. Thus, the outlook for Asia in a stormy and unsettled global environment is one of sustained growth with stability.”
He further said that the SEACEN membership represents 45 per cent of the world’s population, with its economies’ contribution to global gross domestic product (GDP) increasing from 9 per cent at the start of the century to 27 per cent in 2023. In terms of purchasing power parity, SEACEN members collectively account for over a third of global GDP, he said.
While varying in income levels, these countries are generally high-saving economies, with an average saving rate of 37 per cent and an investment rate of 36 per cent of combined GDP, highlighting the significance of domestic resources in fueling growth, which underscores the region’s reliance on internal resources for investment and development.
“The SEACEN group of countries is also a powerhouse of international trade. It accounted for 31 per cent of world exports of merchandise in 2022 according to the World Trade Organization, attesting to its international competitiveness and its central position in global supply chains. The SEACEN group also absorbs 28 per cent of world imports of merchandise, thereby underscoring the vital role it plays in boosting net global demand,” Patra said.
Additionally, the region is actively expanding its digital trade footprint, estimated at $3.9 trillion globally in 2022.
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“Although information on digital trade for each of the member countries of the SEACEN is not uniformly available, it is noteworthy that the Asia-Pacific region exported digitally deliverable services valued at $958 billion, representing 52 per cent of the region’s total services exports,” he said.
Moreover, the digital landscape across these economies has seen substantial growth in recent years, with innovations spanning manufacturing automation, e-commerce platforms, and digital payments. Notably, the region has been at the forefront of industrial robot installations in Asia, spearheading advancements in automation and technology.
While there are notable differences among the SEACEN member economies too, in terms of gross general government debt to GDP ratios, which range widely between 2 per cent and 168 per cent, pointing to high variations in fiscal stances, the median ratio at 58 per cent compares favourably with that of advanced (112.7 per cent) as well as emerging market and middle-income economies (68.6 per cent).
Yet, the region is also a preferred habitat for international financial flows.
“Positive growth differentials vis-à-vis the rest of the world, deep and vibrant financial markets and reasonable stability in financial asset prices contribute to the relative attractiveness of these economies in drawing capital flows. On the other hand, global spillovers from geopolitical developments, geoeconomic fragmentation, and the tightening of financial conditions as a result of the aggressive and synchronised monetary policy tightening worldwide have imposed downward pressures on currencies in the region, resulting in the widening of risk spreads and reversals of portfolio equity and debt flows,” Patra said.
On managing capital flows, he said that right from the establishment of the centre, SEACEN member central banks have expressed an abiding interest in the management of volatile capital flows, especially in mitigating risks to price and financial stability.
“SEACEN central banks’ successes in addressing these challenges are now helping to forge a new consensus on appropriate risk analyses, policy instruments and frameworks as well as proactive policy responses,” he said.
