The Asian Development Bank’s Anxious Anniversary Angles
The Asian Development Bank marked 50 years of operation at its annual meeting in Frankfurt, symbolizing its diverse shareholder and co-financing base as credit and technical assistance lines were a record $27 billion in 2015. Among the regional official lenders it has been particularly aggressive in climate change projects with a promise to double medium-term exposure toward $5 billion. The celebration joy was muted by the latest economic growth forecast for relatively flat performance with subdued Chinese and global demand and perilous monetary policies, with Southeast Asia holding the line at 4.5percent following a dismal 0.5 percent first quarter showing in Korea which helped prompt ruling party majority loss in April parliamentary elections. President Park’s popularity had long been waning with her authoritarian style, and she faces the last year and a half of her term with lame-duck status. Exports and consumption fell before the poll, with the latter stifled by household debt at 150 percent of GDP. Her party’s campaign platform called for monetary and fiscal stimulus, with a local version of “quantitative easing” a centerpiece, but these plans will now be shelved indefinitely with the opposition Minjoo and the new swing People’s Party in control. Targeted tax cuts and infrastructure spending may still be in the mix as the central government tries to regain political momentum from cities that have embarked on building and social transfer schemes. The won has occasionally wobbled with Northern missile tests and border skirmishes but the current account surplus offers support and the short-term hard currency debt/ reserves ratio is manageable unlike the immediate post-2008 period. Regular central bank intervention continues but it has not yet been criticized outright by the US Treasury Department to invite potential trade backlash as the TPP pact stays in congressional limbo during the presidential primary season.
In Singapore as well an expansionary budget was proposed and enacted to boost growth and tackle deflation, with health care and transport priorities to aid the lower-income and elderly population. However shipbuilding remains in a funk and home prices have declined two years in a row without bank mortgage restrictions relief on the horizon. Blue-chip stock market listings like DBS are at single-digit price-earnings values with property correction and reportedly luring bargain-hunters. Across the strait Malaysian shares, up over 10 percent on the MSCI Index through March, were hit as controversial state fund 1MDB defaulted on a $50 million bond payment to an Abu Dhabi holder. Multiple jurisdictions continue to investigate missing accounts, with the Swiss alleging as much as $5 billion may be at stake. Prime Minister Rezak has swatted away resignation pleas from his own party but his brother was forced to step aside as chief executive of top Islamic bank CIMB. A new central bank head was named and was expected to cut rates before the latest twist in the saga, with GDP growth running at 3.5 percent. Portfolio outflows have stabilized and 45 percent foreign ownership of local bonds is the highest in the region. Household and corporate debt at 90 percent and 70 percent of GDP respectively also are the steepest and should jangle policymaker nerves amid the scandal’s confidence blow, according to an IMF spring meeting report.
