ASEAN+3 agreed on a preliminary framework to strengthen the regional currency swap agreements - Photo by Asian Development Bank

JAKARTA (TheInsiderStories) — South East Asian (ASEAN) Finance Ministers and Central Bank Governors, along with China, Japan, and South Korea, agreed on a preliminary framework to strengthen the regional currency swap agreements. The deal aims to avoid over reliance on the US dollar, as stated in the official statement released on Thursday (05/02).

The meeting centered on strengthening the Chiang Mai Initiative Multilateralization scheme, a multilateral currency swap arrangement among the 13 member states. They also reaffirmed to uphold the rules-based multilateral trading system and open regionalism, while resisting all forms of protectionism.

The ASEAN+3 considered that despite a more challenging global environment, the region continues to be a key driver of global economic growth.

In this regard, the finance ministers and central bank governors adopted a vision document dubbed Strategic Directions of ASEAN+3 Finance Process, aimed at exploring new potential areas of common interest and complementarity towards the strategic directions of fostering regional economic growth and promoting integration, while continuing the work on current initiatives to maintain regional economic and financial stability from a longer-term perspective.

“We are committed to further enhancing regional efforts, including accelerating intra-regional trade and investment activities, as well as further deepening our domestic capital markets in order to build resilience,” the ASEAN+3’ central bank and finance chiefs said.

The region expected the economic growth of the ASEAN+3 region to remain steadfast, despite headwinds from trade frictions, softer external demand and tighter financial conditions. They realized that the region is not immune to threats of trade protectionism, the impact would be partly mitigated by robust regional consumption and growing intra-regional trade.

Asian Development Bank (ADB) calculated that regional integration supporting trade and foreign direct invetment (FDI) increased to 47 percent and 51 percent respectively, in 2017. But the tourism declined to 73 percent.

President of ADB Takehiko Nakao who also joined the meeting, shared the solid economic prospects for ASEAN+3 countries and outlined multiple potential drivers of future growth and jobs. Among the drivers, he highlighted regional integration, e-commerce, and tourism. He also reaffirmed ADB’ commitment to the region’ continued economic progress and sustainable development.

ADB predicted that there’s economic growth deceleration. ASEAN+3 economic growth this year will meet a slowdown to 4.6 percent, lower than last year at 4.7 percent. Then it is estimated to have another deceleration next year to 4.4 percent.

Nakao estimated that there will be better-than-expected domestic consumption and investment can still boost growth in some ASEAN+3 economies. Some of the growth drivers are prudent macroeconomic policies and structural reforms, strong consumption from a growing middle class, increasing women’ participation in economic activities, and greater use and application of digital technology.

Other than that, more indigenous product and process innovation, increasing demand for business process outsourcing, expansion of tourism, attracting people from within and outside the region, also growing intraregional FDI to deepen supply chains are supporting the growth.

“But downside risks remain significant,” said Nakao, in press statement released on the same day.

He explained that there’s still risk over the continuing US – China trade tensions, even though both countries are now expecting to end and reach trade deal next month. Moreover, the risks are potential financial volatility due to excessive leverage, evolving political situations, a sharper-than-expected slowdown in Europe on the heels of a disorderly Brexit, and uncertainties in advanced economies’ monetary policies.

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