ASEAN KEY DESTINATIONS
IMF Chief, Lagarde visits Asean countries
“It is quite impressive to see Malaysia's gradual transition from an economy that was largely export-led to one that is more balanced between exports, investment and domestic consumption.
“I believe this is a sustainable pattern,” she told a press conference yesterday at the start of her three-country tour of Southeast Asia.
She is on her maiden visit to Malaysia as head of the IMF and will visit the Philippines and Cambodia next.
The IMF's first female chief added that she was impressed by Malaysia because of two factors.
“The first is the combination of short-term objectives and a much longer-term vision with the identification of those sectors that will be driving the economy forward.
“The second thing is that the country's economy includes many players from the real economy, whether it is the public or private sector, as well as the financial sector.”
However, she highlighted three risks that Malaysia needed to address, the first being its foreign direct investment, which she said had yet to return to pre-crisis levels.
“There is a need to ask why. Next is the high level of debt and the third is inequality.”
“This year, growth in emerging Asia fell to its lowest level since 2008, partly from domestic slowdowns in China and India, but also because of strong gusts from storms in the West.
“Demand from Europe and the United States each accounts for about a third of emerging Asia's net exports. Foreign participation in local sovereign debt markets has nearly doubled over the past five years.
“Again we see this here in Malaysia, where foreigners now hold almost 30 per cent of government bonds. So, from all sides, Asia is exposed to sudden shifts in sentiment.
“Going forward, we believe growth will pick up again, and Asia will retain its position as a growth leader, expanding 2 per cent faster than the world average next year.”
On Greece, she stressed that its creditors were on the same page in their mission to rescue the debt-stricken nation, even as she fell out with eurozone finance ministers earlier this week on its deficit targets.
“All partners share the same objective and concern to make sure Greece is back on track and can return to economic stability as soon as possible. From the IMF's perspective, we expect a real fix, not a quick fix, and that means debt that is sustainable,” Lagarde pointed out.
AFP reported that she and Eurogroup president Jean-Claude Juncker had on Monday “clashed openly” in a rare public disagreement on Greece's bailout schedule.
Lagarde had insisted that Greece should stick to its original target of trimming its debt-to-gross domestic product to 120 per cent from some 170 per cent currently by 2020, while eurozone finance ministers are considering extending the deadline to 2022 amid crippling austerity protests in the southern European state.
Greece's debt is forecast to rise to 190 per cent of its gross domestic product next year.
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