Recent developments in global markets that generated a wave of financial volatility around the world, including economies in Southeast Asia, do not indicate institutional weakness in the region, the Bangko Sentral ng Pilipinas (BSP) said.
In a recent speaking engagement, BSP Governor Amando M. Tetangco Jr. said that while global events as the devaluation of China’s currency, the yuan, and the anticipated normalization of interest rates in the United States ushered a wave of volatilities in Asean markets, this does not mean the region itself is weak.
“For all Asean’s current strength and potential, recent global developments have had an impact. One would surmise that Asean trade exposures to Greece would not be that significant. Yet, when the prospect of a “Grexit” heightened, global financial markets recoiled. Asean was not spared from the contagion even though the impact was not protracted,” Tetangco said.
“When China devalued the Renminbi, this was, literally, closer to home and the impact was more pointed. The devaluation on August 11 was itself a significant surprise, but to see it done on three consecutive days raised considerable concern over the potential extent of a slowdown of the Chinese economy,” he added.
Tetangco also mentioned the volatility caused by the normalization of US monetary policy—from taper tantrums to the still tetative outlook of its markets.
“The impact that these developments have had on Asean does not reflect in any way on any potential weakness of Asean itself,” according to Tetangco.
“Instead, the lesson that I take away is the reminder that we, either as a collective bloc or as individual jurisdictions, are deeply integrated to the ebb and flow of the global financial markets,” he added.
In the case of the Philippines, the governor said, while its $285-billion economy may not be a “large vessel” among jurisdictions, the Southeast Asian nation, nevertheless, displayed strength and ability to “steer through the turbulent and uncertain waters of the last decade.”
“In part, we have been able to steer the economy through these disturbances because over the years, we have built the foundations of a strong macroeconomy,” Tetangco said.