Full Report - Subregional Office for East and North-East Asia - escap

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2013
rates and asset prices. In this regard, low interest
rates helped not only to sustain the growth of bank
loans but also to slow potential capital inflows.
Other policy measures included limiting currency
forwards, imposing capital controls and promoting
capital outflows. For instance, the Philippines
central bank announced limits on banks’ currency
forward positions and banned the overseas funds
for special deposit accounts. Thailand lifted the limit
on individuals making direct investments abroad, but
this action has raised concern that long-term funds
are being traded for short-term funds, making the
country more vulnerable to a sharp capital reversal.
In the case of Singapore and Viet Nam, monetary
policy remained tight in order to curb inflationary
pressures. Singapore’s exchange rate-based
monetary policy tightened, with the pace of
appreciation increasing to restrain imported inflation.
At the same time, macroprudential measures were
augmented to cool down an increase in property
prices, which amounted to more than 50% between
2009 and 2012. Viet Nam also maintained a
generally tight monetary stance, but some of the
earlier stabilization measures were relaxed, with the
refinance and discount rates falling to 10% and 8%
respectively by July 2012, from 15% and 13% at
the end of 2011. In Viet Nam, vulnerabilities in the
banking sector have emerged as a major concern.
In March 2012, the Government approved a plan to
buy non-performing assets from commercial banks.
According to the central bank, bad debt ratios had
increased from 3.1% of loans at the end of 2011
to 8.8% in September 2012. A National Assembly
report in September noted that up to 300 trillion
dong ($1 = 20,855 dong in September) would have
to be injected into the struggling financial sector. In
a government directive approved in February 2013
said that bad debt should be cut to below 3% of
loans by 2015.
In the lower income countries, monetary policy
continued to rely largely on regulation-based
instruments. With the rapid growth of domestic credit
and the opening of stock exchanges in Cambodia
and the Lao People’s Democratic Republic, enhanced
supervision and regulation of the financial sector
have become more important. In Cambodia, the
monetary authority raised the reserve requirement
for banks and made a commitment to safeguarding
the health of the banking system by strengthening
supervisory capacity and strictly enforcing prudential
regulations. In Myanmar, monetary policy is largely
in its early stages of development, and financial
intermediation remains weak. However, the financial
sector is being gradually modernized, starting with
partial liberalization of the deposit rate and the
relaxing of some restrictions on private banks. In
Timor-Leste, credit to the private sector has risen but
remains low at only 13% of non-oil GDP, reflecting
the lack of collateral, weak contract enforcement
and the limited number of banks.
Current account surpluses narrow but FDI
and remittances remain strong; portfolio
flows volatile
Balance of payments in general remained favourable,
although the impact of weakening external demand
certainly was felt in the export-oriented economies
of the subregion. In Singapore, a contraction in
the momentum in respect of the export of goods
became more visible in mid-2012. Merchandise
imports also decelerated but less quickly, thus
trimming the current account balance from 21.9%
of GDP in 2011 to 18.6% in 2012. In Malaysia,
while the export of goods slowed, import growth
was relatively more resilient in 2012 primarily on a
surge in fixed investment and continued inventory
accumulation. The country’s current account surplus
was trimmed from 11% of GDP in 2011 to 6.4% in
2012 (see figure 2.16). Thailand’s export performance
gradually improved on restored export-oriented
production capacity, but it was still constrained
by weak export orders. Total merchandise exports
expanded modestly by 5% in 2012, partly on
the low base effects. While automobile exports
advanced solidly, shipments of electronics and
electrical products fell markedly. Agricultural exports
also dipped, reflecting the lower exports of rice
and generally less supportive prices.
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