United Nations, New York Dec 9, 2014 By Tarisa Watanagase 1 - - PowerPoint PPT Presentation

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United Nations, New York Dec 9, 2014 By Tarisa Watanagase 1 Output loss Output loss Fiscal cost Fiscal cost Increased in Increased in Peak NPLs Peak NPLs (%of trend (%of tre d (% of GDP) (% of GDP) public debt public debt (%

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United Nations, New York Dec 9, 2014 By Tarisa Watanagase

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Output loss Output loss (%of tre (%of trend d GDP) GDP) Fiscal cost Fiscal cost (% of (% of GDP) GDP) Increased Increased in in public debt public debt (% of (% of GDP) GDP) Peak NPLs Peak NPLs (% of (% of total total loans) loans) Thailand 109.3 43.8 42.1 33 Malaysia 31.4 16.4 0.2 30 Indonesia 69 56.8 67.6 32.5 Korea 57.6 31.2 9.9 35

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Growth % Inflation

Credit growth% Cur a/c to GDP % External debt to exports %

FX to imports, month

Indonesia

7.6 8.6 20.7 ‐2.4 214.7 3.1

Japan

5.2 1.1 10.8 3.2 … 3.4

Korea

7.4 5.3 19.8 ‐1.2 77.6 2.2

Malaysia

9.6 3.8 … ‐6.0 44.3 …

Thailand

8.1 4.8 25.0 ‐6.3 132.6 5.1

Indonesia

5.1 9.7 22.4 2.5 162.5 5.3

Japan

1.8 0.0 ‐1.0 3.9 230.3 15.0

Korea

6.7 2.7 6.2 2.7 69.4 6.3

Malaysia

5.4 1.5 5.2 9.7 41.1 4.5

Thailand

5.1 2.2 6.3 1.8 62.9 4.9

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1. Avoid boom-bust cycle. Sustainable growth in line with

country’s economic potential much more stable and desirable

2. Central bank must pursue dual mandates of price stability

and financial stability

Avoid accommodative monetary and fiscal policies over extended

period, which are sources of inflation/ bubbles/ imbalances threatening economic stability.

Dampen sectoral overheating with macro-prudential measures but
verall overheating must be dealt with tightened economic policies

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3. Maintain policy space for conventional policies.
impact of unconventional monetary policy not clear but

potentially very costly

huge fiscal spending usually needed for financial

sector cleanup

Fiscal policy more effective in reviving a post- crisis

economy

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4.

Maintain resilience amid global integration/ volatilities, esp. small economy. Promote awareness

f sustainability and risk management of general

public for sustainable corporate and household debts

5.

Understand and mitigate systemic risks of banking sector

6.

Policy makers must be prepared to take away the punch bowl when needed

7.

.

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capital flows and price and financial stability: MP less

effective, risk of financial imbalances increases

Design of institutional setup, framework for effective

monitoring and assessment of systemic risk, domestically and internationally

Effective international mechanisms for prevention of
crisis. Mandatory FSAP for systemically important

countries?,

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Implementation of financial stability measures: how to

define, identify, measure, analytical capacity building

Governance structure to mitigate risks to central bank