ASEAN+3 finance chiefs warn of rate hike risk for the region

TOKYO (Kyodo) — Asian finance chiefs on Thursday warned of the “downside risks” of Russia’s invasion of Ukraine to their region’s economic recovery, even as they said they expected that their countries emerge stronger this year from the coronavirus pandemic.

The finance ministers and central bank governors of Japan, China, South Korea and the Association of Southeast Asian Nations said in a joint statement after an online meeting that they had agreed to deepen regional financial cooperation to deal with the fallout from the conflict between Russia and Ukraine. as well as the pandemic.

In addition to the war, rising food and energy prices “could pose downside risks to the region’s trade and investment, growth and inflation prospects”, said finance officials.

They also cited “stronger-than-expected normalization of monetary policy in some major advanced economies” as another risk for the region, which recorded 6% growth last year, helped by high vaccination rates against COVID-19.

Financial markets and economies have been closely watching rate hikes, which could weaken emerging economies’ currencies and increase some countries’ external debt burdens.

Japanese Finance Minister Shunichi Suzuki told reporters after the conference that the challenges facing Asian economies are mainly caused by the invasion.

“I underlined that the invasion had a serious impact on the global economy by causing energy and food price hikes, supply chain disruption, destabilization of financial markets and increase in the number of refugees,” Suzuki said.

The finance chiefs said in the statement that the uncertainty over the global economy has underscored the importance of strengthening regional financial cooperation through the Chiang Mai Initiative’s multilateralization program.

Under this program, member countries facing short-term liquidity shortages can access a pool of dollars in exchange for their currencies.

The CMIM evolved from the Chiang Mai Initiative, the first regional currency swap agreement launched by the ASEAN plus three countries in May 2000 to prevent a repeat of the 1997 Asian currency crisis.

CFOs welcomed the updated MIMC operational guidelines that added each member’s local currency, other than the dollar, for currency swap agreements.

Earlier today, the finance chiefs of Japan, China and South Korea held a separate virtual meeting and said they “should remain alert” to risks, including uncertainty over the Russian aggression.

They also pledged to continue “to use supportive policy tools to sustain the recovery while preserving monetary and financial stability and long-term fiscal sustainability.”

The 10 members of ASEAN are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

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