03 May 2012 (12:00 pm-1:30 pm, Meeting Room 5)

Global imbalances and the distribution of current accounts across key economies continue to be an important macroeconomic issue. In the pre-GFC period, the "Anglo" economies tended to have large current account deficits reflecting high consumption and low savings rates. On the other hand, systemically important emerging economies such as China and the Asian tigers tended to have current account surpluses due to relatively inflexible exchange rates, as well as high investment rates and relatively low consumption to GDP ratios. However, the game is changing in the post-GFC period. Namely, the developed world continues to feel the effects of the Global Financial Crisis, most notably through de-leveraging. This process of balance sheet repair is driving down consumption growth, thus raising savings and lowering current account deficits. By definition, this means that emerging market surpluses such as those in most of Emerging Asia must narrow as well.

In this seminar we intend to explore the challenges facing the region's policy makers in reducing their current account balances. We see two possible models:

1. Policy makers can continue with their relatively export-dependent growth models with monetary and exchange rate policies tied to or highly affected by the US. This path would drive surpluses lower at the cost of growth; or
2. Policy makers could move toward a relatively consumption-based model that requires more policy independence from the Federal Reserve. In the latter scenario, small markets such as Singapore could still focus on exports, but the region as a whole would need to shift to being driven by Asian demand for Asian final goods products.

So far, the evidence seems to be pointing towards a mix of both scenarios. We would plan on assessing the region's macro developments in the post-GFC period in this seminar and to discuss policy options and challenges in achieving stronger Asian de-linking and more sustainable and better-balanced growth paths.

Speakers:

Jaime Augusto Zobel de Ayala
Chairman and CEO, Ayala Corporation

John Chu
Group CIO, AIA Group Limited

Paul Gruenwald
Chief Economist, ANZ

Changyong Rhee
ADB Chief Economist