Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, rated Southeast Nation (ASEAN) countries' economy now decelerating amid the global uncertainty - Photo by President Office

JAKARTA (TheInsiderStories) – Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, rated Southeast Nation (ASEAN) countries’ economy now decelerating amid the global uncertainty. As known, the Fund has revised down the region’ GDP from 5 percent to 4.6 percent in this year followed the slowing global economic growth.

“ASEAN has steadily increased its contribution to global growth. In fact, in 2019, the 10 ASEAN countries contributed 10 percent of global growth—just about as much as the 19 countries in the Euro zone. As in most of the rest of the world, however, growth in ASEAN is now decelerating,” said the managing director during ASEAN Summit in Bangkok, Thailand on Nov. 4.

During the Annual Meetings of the IMF, the Bank are projecting the global economy only grow 3 percent and the ASEAN region outperforms with 4.6 percent growth. She noted, this happening partly because of trade tensions taking a toll on business confidence and investment, Brexit, high debt, and geopolitical tensions. All of these are contributing to uncertainty, said Georgieva.

“Clearly, the near-term challenge is to navigate slower growth. And for this, countries really have to tap all instruments as appropriate— monetary policy, fiscal policy, and structural reforms. Above all, trade tensions need to be reduced,” she adds.

In that context, she welcomed the recent announcements from the United States (US) and China. The IMF’ leader really hope that the negotiation can go from trade truce to a sustainable and long-term trade peace.

Georgieva also believed, ASEAN can help a lot in fostering trade by moving beyond trade in goods to increased integration in services, finance and labor. The region is also right to focus not only on the short-term challenges but also the longer-term goal of sustainable development that requires addressing issues such as inequality, pressures from aging in some countries, quality infrastructure, quality human capital, and climate change.

Recently, the Asian Development Bank estimates that between 2016 and 2030, ASEAN needs to invest $2.8 trillion in quality infrastructure. She stated,”The point is so simple: invest in people today, so you can be wealthy tomorrow. This requires domestic resource mobilization, but it also requires making it possible for the private sector to invest for the SDGs massively.”

Lending Capacity Extended to 2020

On Nov. 5, the IMF executive boards approved the terms of the 2016 Borrowing Agreements between the IMF and 40 members are now effective through end-2020. The extension of terms preserves the agency’ overall lending capacity of about US$1 trillion for an additional year.

 This step is part of a broader package of actions on IMF resources and governance reform—including support for maintaining the agency’ current resource envelope and considering a doubling of the New Arrangements to Borrow (NAB) and a further temporary round of bilateral borrowing beyond 2020.

The IMF has entered into several rounds of bilateral borrowing agreements over the past decade to supplement its quota and NAB resources and meet the potential financing needs of its members.

In 2016, in view of continued uncertainty in the global economy, the membership committed to maintain access to bilateral borrowing, as a third line of defense (after quota and NAB resources) and under a revised governance framework, with an initial term through the end of 2019, extendable for a further year by the Executive Board and with creditors’ consents.

Total commitments under the 2016 borrowing framework from 40 members amount to about SDR318 billion ($433 billion) at end-September 2019 exchange rates.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com