Asian policy makers are bolstering efforts to protect their economies from weakening global growth, as Indonesia unexpectedly cut interest rates and the Philippines unveiled a stimulus plan.
Bank Indonesia lowered its reference rate by a quarter of a percentage point to 6.5 percent yesterday, defying the predictions of all 15 economists surveyed by Bloomberg News. Philippine President Benigno Aquino announced a 72 billion-peso ($1.7 billion) spending package today as his government cut growth estimates, while Singapore's central bank is forecast by economists to say this week that it will slow or end its currency appreciation.
"We want to be ahead of the curve in anticipating the impact of the global economy," Perry Warjiyo, Bank Indonesia's director of economic research, said in a Bloomberg Television interview today. "It will impact through the region, and we will see there is a decelerating trend of inflation and a downward revision to economic growth. Sooner or later, central banks need to rebalance the preference of their monetary policy response."
Emerging-market nations have turned from fighting inflation to supporting growth as a struggling U.S. recovery and deepening European crisis threaten the global economy. Brazil, Turkey, Russia and Pakistan have cut borrowing costs in 2011, while Asian countries from the Philippines to South Korea have refrained from further rate increases in recent weeks.
Taking Insurance
"It's primarily because of the weaker global economic backdrop that they are taking out some insurance against the global economic headwinds," said Leif Eskesen, a Singapore- based economist at HSBC Holdings Plc.
The MSCI Asia Pacific Index of stocks has slumped 15.4 percent this year as investors pare bets on emerging markets. Some Asian currencies have tumbled against the dollar in the same period, led by a slide of about 9 percent in the Indian rupee, according to data compiled by Bloomberg.
Indonesia's rupiah has weakened 3.5 percent in the past month. Bank Indonesia said yesterday it has sufficient foreign- exchange reserves to support the currency.
"We are confident we can stabilize the market," Warjiyo said in the interview today.
Asian nations from Malaysia to the Philippines are shifting their focus to shielding growth even as elevated inflation prompts policy makers in countries such as Vietnam and India to persist with monetary tightening.
India's industrial output rose 4.1 percent in August from a year earlier, less than the median 4.7 percent estimate in a Bloomberg News survey, a report showed today.
Philippine Spending will boost
Aquino said today the additional spending he authorized for the stimulus package includes 5.5 billion pesos for infrastructure. The Philippine government cut its growth forecasts for the Southeast Asian nation for 2011 and 2012.
"If the fiscal stimulus does its job, this should give the necessary push to keep our economic growth in a solid upward trajectory," central bank Governor Amando Tetangco said today. The Philippines has sufficient liquidity, a stable exchange rate and a "manageable" inflation outlook along with "fiscal space" to help support economic growth, he said in an e-mail reply to questions.
Bangko Sentral ng Pilipinas will consider global developments, including Indonesia's rate cut and the slump in Philippine exports in next week's policy meeting, Tetangco said.
"In most jurisdictions, inflation seems to have become less of a pressing concern," he said. "The weakness in advanced economies is seen to weigh more on emerging economies than previously anticipated."
