WITH THE COLLAPSE in commodity prices and growing global financial-market volatility, most Asian countries are being forced to rely more on domestic demand and undertake drastic economic restructuring to strengthen growth.
Indonesia has embarked on fiscal reform to ensure that its money is spent on productive industries rather than continuing to support a fuel subsidy.
At the annual meeting of the Asian Development Bank (ADB), Bambang PS Brodjonegoro, the finance minister of Indonesia, said his country was moving away from the unproductive petrol subsidy to providing more productive infrastructure and social protection.
“For the remaining subsidies, we are working to ensure they are better targeted to the poor and the needy. The government has also delivered a series of deregulation packages,” he said.
There are now 12 structural reform packages being implemented, all directed at maintaining purchasing power to boost consumption and improving the business climate to promote investment.
The government is also working closely with the central bank to ensure that monetary policy will be set in line with the fiscal and structural reforms.
In 2015, Indonesia’s gross domestic product grew by 4.8 per cent. Inflation was 3.35 per cent. Despite low commodity prices, it recorded a trade surplus of US$7.52 billion, and its current-account deficit shrank to 2.1 per cent from 3.1 per cent in 2014.
“It is very important to acknowledge that the global economy will continue to be volatile in the midst of low commodity prices. For an emerging economy like Indonesia’s, that means we cannot rely on the external sector to promote growth. We have to explore all possible policy tools – fiscal, monetary and structural reform,” he said.
Nguyen Thi Hong, the ADB governor of Vietnam, said that country was also going through a transition, with GDP growth reaching 6.7 per cent last year and inflation under control.
Vietnam has been restructuring its banking system, including tackling non-performing loans.
It has also entered free-trade agreements with major trading partners.
“This process is expected to accelerate the structural transformation of Vietnam’s economy, stimulate investment and reinforce the further diversification of Vietnam’s export basket towards manufacturing products,” he said.
Somdy Douangdy, governor of the central bank of Laos, said his country’s economy expanded by 7.4 per cent last year, down from 7.8 per cent in 2014.
Inflation has been adjusted to a downtrend from the decline in global oil prices and moderation in domestic demand.
On the monetary front, the Laotian government has taken a series of measures including issuing tighter regulations on foreign-currency management and widening daily exchange movements to allow flexibility to some extent.
“A stable exchange rate against major foreign currencies will remain as a key priority in order to improve domestic and foreign investors’ confidence and to boost economic output,” he said.
“We also acknowledge the necessity to build up gross international reserves as a cushion against external shocks.”
The government has implemented a mechanism to assist domestic revenue collection, enforce laws and regulations and strengthen public-debt management, he said.
Vongsey Vissoth, Cambodia’s finance minister, said the country continued to sustain its strong growth trend over the past decade with solid expansion of 7 per cent in 2015 as a result of industrial and service-sector expansion.
Agriculture grew by only 0.2 per cent, however, hampered by the unusual drought brought about by El Nino.
Inflation fell to 1.2 per cent compared with 3.9 per cent in 2014 and is projected to be at 1.9 per cent this year. The fiscal deficit narrowed to 3.7 per cent of GDP last year.
The poverty rate was slashed to 14 per cent in 2014 from 53.4 per cent in 2004.
Cambodia’s GDP growth is forecast at 7.1 per cent this year and 6.9 per cent in 2017.