IMF·AMRO "Easing Policies Should Continue Until Crisis Overcome"... Asia Expected to See Economic Recovery Next Year

ASEAN+3 (Korea-China-Japan) Deputy Finance Ministers and Central Bank Deputy Governors Meeting

[Sejong=Asia Economy Reporter Son Seon-hee] The International Monetary Fund (IMF) and the ASEAN Macroeconomic Research Office (AMRO) have advised South Korea, China, Japan, and the Association of Southeast Asian Nations (ASEAN) countries to "maintain accommodative macroeconomic policies until the COVID-19 crisis is overcome." The related countries forecast that the regional economy will show a 'steady recovery' starting next year and agreed to cooperate in responding to economic structural transformation after COVID-19.

According to the Ministry of Economy and Finance on the 22nd, the 'Korea-China-Japan Deputy Finance Ministers and Central Bank Deputy Governors Meeting' and the 'ASEAN+3 (Korea-China-Japan) Deputy Finance Ministers and Central Bank Deputy Governors Meeting' were held via video conference the previous day, where regional economic trends and economic policy directions were discussed.

AMRO recently projected this year's economic growth rate for Korea, China, Japan, and the 10 ASEAN countries at 6.1%, revising it downward from 6.7% in March. It cited the spread of the Delta variant, supply chain disruptions, and uneven recovery speeds among countries as major downside risks.

Lee Chang-yong, IMF Asia-Pacific Director attending the meeting, emphasized, "Inflationary pressures in the Asia region are relatively low, but other downside risks remain," adding, "Rapid vaccination within the region is important for the recovery of growth."

Both organizations forecast that COVID-19 will transition from a pandemic to an endemic and suggested maintaining accommodative macroeconomic policies, focusing support on affected groups, and preparing for structural transitions such as green and digital economies until the crisis is overcome.

In this regard, member countries expect the regional economy to show a steady recovery next year as vaccination efforts accelerate within the region. They also agreed to cooperate in responding to economic structural transformation after COVID-19. AMRO also slightly revised upward its regional growth forecast for next year to 5.0%, compared to 4.9% in March.

South Korea, along with Brunei, is serving as co-chair of this year's ASEAN+3 Deputy Finance Ministers and Central Bank Deputy Governors Meeting. Yoon Tae-sik, Director General for International Economic Affairs at the Ministry of Economy and Finance and the chief representative, proposed ▲strengthening regional supply chain resilience ▲preparing for green and digital economic transitions ▲continuing accommodative macroeconomic policies for the time being and orderly normalization thereafter to overcome the crisis and respond to structural changes.

Director General Yoon said, "Based on multilateral cooperation channels such as the Regional Comprehensive Economic Partnership (RCEP), we need to identify and reinforce weak links in the regional supply chain and promote the free movement of goods and people to enhance the overall resilience of the regional supply chain. Also, South Korea will actively contribute to the regional green and digital economic transition process."

Meanwhile, at this meeting, member countries narrowed differences on key issues such as selecting a LIBOR replacement rate and establishing regional currency provision procedures, forming a consensus on specific directions. They also approved next year's budget and the 2022?2026 medium-term business plan, focusing on organizational expansion and role enhancement to elevate AMRO's status on its 10th anniversary this year.

As future tasks for ASEAN+3, discussions began in the second half of this year on four issues: ▲strengthening support for infrastructure investment ▲expanding support to address structural issues ▲cooperation on climate change response ▲policy coordination on technological advancement (fintech). South Korea will lead the fintech working group and pursue tasks such as introducing an open banking system and establishing fintech regulatory guidelines by next year.