Transcript of Asia and Pacfic Department Press Briefing

April 20, 2018



Director, Asia and Pacific Department, IMF


Deputy Director, Asia and Pacific Department, IMF


Deputy Director, Asia and Pacific Department, IMF


Deputy Director, Asia and Pacific Department, IMF


Press Officer, Communications Department, IMF

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(8:00 a.m.)

MS. YAN: Good morning everyone and good evening to those who are watching us online from Asia. Welcome to this IMF press conference on the Asia Pacific Region. My name is Ting Yan. I am the press officer of the IMF. Here with me today I am glad to introduce sitting in the middle is Mr. Changyoung Rhee, director of the Asian pacific department of the IMF. And we have three deputy directors here. Mr. Markus Rodlauer, Mr. Odd Per Brekk and Mr. Ken Kan. With that let me turn to Mr. Changyong Rhee for opening remarks and then we will take your questions after that.

MR. RHEE: Thank you, Ting. Good morning. And good evening in Asia again. I am very pleased to share with you the main economy outlook for Asia based on the, our forthcoming publication, Asia and Pacific Regional Economy Outlook which will be launched on May 9 in Hong Kong. So let's start with our key messages.

First, the Asia region remains the main engine of growth of the global economy, accounting for more than 60 percent of the global growth. Regional output is projected to grow by 5.6 percent in 2018 and 2019. That is about 4.1 percent percentage point higher than we expected in October. This over the region was supported by external demand as well as accommodative financial conditions.

Second, risk around the forecast broadly are balanced for now but over the medium term, downside risks dominate, including from a tightening of global financial conditions, a shift toward inward looking policies and an increase in geopolitical tensions. And over the longer term, Asia faces number of important challenges from population aging, slowing productivity growth, and the digital revolution which of course bring large opportunities along with risk.

Third, Asia has enjoyed relatively subdued inflation even the growth has been picking up. But policymakers should not be complacent. We find that, you know, Asia's inflation rate has been explained very much by the global forces and then this global forces could easily well divorce.

First, the strong economic outlook provides a valuable opportunity to -- opportunities to focus medium term macroeconomic policies on building many buffers we need to increase resilience and pushing ahead with the structural reform to address longer term challenges.

As MD several times emphasized in this spring meetings, when sun is shining it is time to fix the roof. So let me expand on these points before we turn to your questions.

For most Asian countries, we've revised our growth forecast upward in the next two years relative to our growth October forecast. In China, growth is expected to moderate to 6.6 percent in 2018 or .1 percentage point higher than expected in October as financial, housing and fiscal tightening measures take effect.

In Japan, growth has been above potential for eight consecutive quarters and is expected to remain strong 1.2 percent this year. Actually today this year's 1.2 percent growth rate is 1/2 percent higher than we expected in October.

In India, growth is forecast up to 7.4 percent in fiscal year 2018 and 2019 as the economy recovers from temporary disruptions related to the currency exchange initiative and the rollout of the new Goods and Service Tax.

Growth in most other countries in the region include Asian countries and small state and pacific island countries, the growth is expected to be strong.

So let's move on to the risk factors. In the short term, the global recovery could gain -- global recovery could prove stronger than expected amid strong consumer and business confidence and still lose financial conditions. But on the downside, Asia remains vulnerable to tightening and global financial conditions while continued easy financial conditions could risk a further buildup of vulnerabilities. More inward-looking trade policies as highlighted by recent tariff actions and announcements would certainly affect the Asia largely because Asia is more open than compared to other regions. And geopolitical tensions could have serious repercussions on financial market and on the real economy.

As for the long-term challenges, Asia's long term growth prospects are impacted by demographics, slowing productivity growth and the rise of the digital economy. Asia risks becoming old before becoming rich. Asia also experiences a significant productivity growth slowdown since the global financial crisis.

Finally, Asia is embracing the digital revolution and while some recent advances could be truly transformative, they also bring challenges including with regard to future of work.

Despite the strong growth, we find that the inflation in Asia has remained relatively low as in other regions and indeed, the gaps between headline inflation and the inflation targets are generally larger in Asia than in other regions. So why the inflation is not picking up despite the growth is more puzzling in Asia compared with other regions.

We have a good analysis on this issue and our analysis suggests that this low inflation has been driven mainly be temporary and global forces in Asia including imported inflation but as you know these global and the temporary factors could of course reverse.

Moreover, the inflation process in Asia has become more backward looking - that means stickier- suggesting that if inflation rises in the future, it may persist.

And finally, we have some evidence that the Philips Curve has flattened which means the sensitivity of inflation the economy slack has decreased. That suggests that if inflation rises, the output cost of reducing it will be larger. So there are plenty of reasons why the policymaker has to pay attention to the possibility of rising inflation in the future.

Let me move to the policy recommendations. Against this backdrop, policy should aim to strengthen buffers, increase resilience and ensure sustainability. With output gap closing in much of the region, fiscal policy while it is growth friendly should generally be geared toward strengthening buffers and safeguarding sustainability.

Subdued inflation provides scope for accommodative monetary policy stance in much of Asia. But given our research findings on inflation, policymakers should be vigilant toward any incipient signs of inflationary pressure. Strengthening monetary policy frameworks and central bank communications can better anchor expectations and exchange rate flexibility can help to insulate economies from imported inflation.

Finally, macroprudential polices remain an important part of policy tool to handle excessive credit growth. The current growth momentum provides an opportunity to pursue fiscal, financial and structural reforms, including those to promote inclusive growth and allow economies to reap the full benefit of digital revolution.

So let me reiterate our key message before concluding. First, the economic outlook for Asia and the Pacific remains strong and the region continues to be the main growth engine of the global economy.

Second, risk around the forecast of broadly balanced in the short term but downside risks dominate over the medium term. And the region faces serious structural challenges over the longer term.

Third, Asia has been in a sweet spot of strong growth and benign inflation but inflation may rise and the policymakers must be, remain vigilant. Fourth, the strong economic outlook provides a valuable opportunity to fix the roof by building buffers and implementing reforms.

In a nutshell, Asian economies continue to perform well and strongly but there are considerable risks and challenges ahead. And policy making should be prudent and focus on increasing resilience. Thank you. Now let's turn to your questions.

MS. YAN: Thank you. Please identify yourself before you ask questions and we will take a few questions together.

QUESTIONER: Thank you, sir. I have two questions. IMF raised the World Economic Outlook projection to 3.9 percent this year and next year. That is 0.2 percent higher than that of October. While the Asia Pacific regional output projection is just 0.1 percent higher than expected in October. So would you elaborate more on this? Is Asia region sort of losing momentum at this moment?

And also how do you think the current tension between China and the U.S. may bring changes to the global supply chain and will this affect your economic projection in Asia Pacific region? Thank you.

MS. YAN: Thank you. Let's take a couple more.

QUESTIONER: Thank you. Do you get any sense in this building that the reforms in India will take a back seat because of elections? Why does this kind of thinking happen, can you explain a little bit?

And India being a major economy, what role it can play in the development and growth of the Indo-Pacific region?

And finally, in south Asia, Bangladesh is the second fastest growing economy. Can you give us any sense what your impression about the Bangladesh economy, given that they are having a major Rohingya crisis? Thank you.

MS. YAN: Thank you.


Yes you are right that the global outlook was revised over by 0.2 percent while emerging Asia's growth revision was zero at this time.

First, you know, the major reason for the growth revision from October was due to the U.S. tax policy and then also the strong performance in Europe. So I can say that the growth pick-up from October to now is mostly due to the, mostly for the advanced economies including Japan in Asia.

So Asia as a whole growth outlook was also revised upward by over 0.1 percent. But that doesn’t not necessarily mean that emerging Asia's growth rate momentum is going down. Actually if you look at China, the growth rate in 2017 was 6.9 percent. In 2018 we believe it's going to be 6.6 percent but I think it's a natural, you know, path on a more sustainable growth path and that during the, you know, as a part of the catching up period. So we and so India's growth rate has picked up too.

So overall, I think that, we can say there is a very positive sign that now finally advanced economies which have suffered a lot with the slow growth in the last couple of years now finally trying to move onto the recovery path, so now the whole world is now the growth pole has now become a multipolar and the advanced economies as or as the emerging Asia which has led the growth. So I will think it is a very positive development.

MR. RODLAUER: I think the question was whether trade tensions would affect global supply chains, and obviously trade has brought so many benefits and a large part of those benefits even though not all of them but many of them have derived from the efficiency gains that have revolutionized global manufacturing production through the integration of production over many countries in multilateral supply chains. That has benefited incomes both in those producing countries but also consumers in consumption countries.

The recent study in the U.S. has shown that consumers have benefited a lot from these supply chains, especially poor consumers. So it is critical and the IMF is on the record many times during these meetings and as well these, the statements by all the members that have come here say it quite clearly that an open multilateral trading system based on strong institution is very important and we support that otherwise supply chains of course would be affected if it were not the case.

MR. RHEE: Before we ask, you know, Ken to answer India questions, since our surprise is the actually very big growth revision for Japan so let me ask Odd Per to especially a background of why we revised Japan's growth rate by a large margin to 0.5 percent.

MR. BREKK: Thank you very much and good morning. So in a sense Japan has actually been a bright spot in the global economy over the last couple of years. And so if the question is, is Asia losing momentum, that's certainly not the case in Japan. The Japanese economy has grown above potential for two years, more than two years now, and we are projecting some slowdown, that's natural given the underlying forces, given demographics, but it grew by something like 1.7 percent last year and we are projecting 1.2 this year. That's a lot higher than what we expected before because of external demand as well as some more fiscal stimulus than we expected. But we are expecting a further gradual decline to .9 percent growth next year. But, again, this is a natural evolution. The surprise was actually on the up side.

The growth drivers in 2018 in Japan include private investment, which is expected to increase, also due to the Olympics in 2020. And, as I said, a favorable external environment will also likely continue to underpin solid export growth with spillovers to investment and imports.

Thank you.

MR. KANG: Just on your question about reforms in India, I think in recent years India has made very impressive progress in reforms. Just to highlight a few, the recent implementation of the national Goods and Services tax is a major reform of the India tax system. It will enhance the efficiency of intra Indian movements of goods and services, help create a common national market, as well as help boost jobs and growth. The second major achievement I would highlight is introduction of flexible inflation targeting and of a statutory monetary policy which has helped to strengthen the monetary policy framework. And, lastly, the government has recently announced a major recapitalization plan for the public-sector banks in order to accelerate the work out of nonperforming loans, as well as made some important legal improvements through a new insolvency and bankruptcy law.

And so I think we expect and hope that the reform momentum continues. But you are right, looking ahead there are important policy priorities. And here I would just highlight a few. One is to continue improvements in product and labor market reforms with a focus on increasing formal female labor participation, to improve the business environment, and reduce complex regulations, but also to address supply bottlenecks, particularly in the agricultural sector and distribution networks.

On your second question about the role of India in the region, I think given our robust growth forecast where we see India's growth rising from 7.4 percent in '17-'18 to 7.8 percent in 2019, we do expect India's role in the region to continue to expand. That being said, India does have room to expand its export orientation and to reduce further trade and non-trade barriers. The statutory tariff rate in India is relatively high at about 15 percent, and higher than those in the rest of the region. So there is room to do more on trade reform.

I think your last question was on the outlook for Bangladesh. I think you're right that we continue to have a very favorable outlook for growth in Bangladesh at around 7 percent in fiscal year '17, driven by robust growth in private consumption and investment. The current account deficit is projected to widen somewhat to 2 percent and inflation has picked up to close to 6 percent. So looking ahead, the priority should be take advantage of the cyclical upswing to implement needed structural reforms, and in particular to address the weaknesses in the banking sector, the NPL situation with the public sector banks, but also the profitability of the private ones. But also to put in place comprehensive tax reforms in order to generate the needed resources to enhance spending on health, education, and the infrastructure.

MR. RHEE: Let me clarify one thing. We are not saying that India's structural reform speed will slow down because of elections. What we are saying is that the growth momentum and the structural reform momentum should continue despite the election period. So there is something misquoted.

MS. YAN: Thank you. Let's take a few more questions. The lady in the front row.

QUESTIONER: I have two questions. So the first one is I want to know what are some downside risks in the near and middle-term of China's economy. And, second, can you make some comments in terms of China's debt control and also China's ability to confront the spillovers of the tightening of global financial conditions?

Thank you.

MS. YAN: And the gentleman in the second row here.

QUESTIONER: Thank you. I want to ask about how the adherence and performance of Mongolia in regard to the current Extended Fund Facility been perceived by the IMF? And while Mongolian authorities have been given some credit for the recovery, some critics have said that it is mainly due to higher commodity prices and demand. So how accurate is this assessment?

And my second question has to do with the commodity market. Much has been said about the potential boom of the copper market due to higher consumption of electronics, and especially electronic vehicles. So on the other end of the spectrum is the coal market, which is expected to be pushed out in favor of renewable energy. So how as the IMF viewed both the near and the long-term prospects of these two markets, especially in regard to the Asia Pacific Market?

Thank you.

QUESTIONER: Good morning, Mr. Rhee. As you know, government of Indonesia does a lot of the thing to push our economic growth, such as tax information, reforms on the subsidies policy, and then pushes the infrastructure spending. My question is, how about the forecast of IMF of Indonesia?

The second is does the IMF have any recommendation to push our economic growth, because next year we do election period and then a lot of other things that we should do.

Thank you.

MS. YAN: Thank you.

MR. RODLAUER: Okay. One of the main downside risks for China, first we see the near-term outlook for China very benign and positive. China has done very well in 2017. We've forecast a small decline of growth this year to 6.6 mainly because the contribution of the external sector will not be as large as it was in 2017, but domestic demand continues to be robust for the second half of the year, with a focus and slowdown both because of real estate and because of investment. But overall the future for the Chinese economy continues to be bright in our review. There is room for further catch up and productivity gains. And the rebalancing will continue as many people move from the less productive rural economy into urban economy. So the medium-term growth outlook and potential for China also in the private sector, which as you all know is very dynamic, the digital economy of China is very strong. So we see a lot of upside there.

On the downside there are obvious risks both from the global economy. If policies turn inward globally, that would affect China because it is a very open economy already and quite dependent on exports. The main risks in China really are medium-term. It relates to the reforms that are on the agenda. We all know that China is working hard to reduce its debt burden and the risks that stem from financial sector imbalances and the very rapid growth of the financial sector. These reforms are under way. They cannot be done in one or two years, they require a sustained long-term effort to address these risks. But overall we are quite optimistic that the authorities will again find a way through these challenges.

What's the risk of the spillovers from global financial tightening to China? We see those risks as relatively limited because China's financial markets are not yet very integrated with the global financial markets. Capital controls are in place and have proven to be quite effective. So the risks from global financial tightening as such are not seen to be that large for China.

Mongolia program is now one year old. It was approved almost exactly a year ago. As you know, the macroeconomic results of the program have been anything short of phenomenal. We really have beaten everybody's expectations, both on the growth side, on the real side, which is of real importance, very, very rapid recovery of the economy, tremendous fiscal adjustment by 15 percentage points of GDP. I don't know our records, but it must be very high up in terms of how fast the fiscal has been corrected, balance of payments has improved. So the short-term macroeconomic stabilization is really very dramatic and very strong, and we see the government committed to continue with that path.

Of course, a program like that is a live animal. It always has to respond to different circumstances and domestic pressures and so forth. So, you know, the authorities will have to continue to navigate carefully, make sure that they stick with the macro adjustment, and make sure that the key reforms that are there are implemented. The next step of the banking reform is a big step. You know, we have done the asset quality review, the program has done that, the results are out. Now, the task is to put this into action, to make sure the banks that need capital get the capital and that the financial supervision reforms are undertaken as in the program.

So there are lots of challenges ahead, but we do see a government fully committed to continue with the programs. I think it's overall a good story.

How dependent is Mongolia on the commodity outlook? Obviously they are very dependent. I think the outlook there is also quite good even though commodity markets have proven very volatile, so it's very hard to forecast. But structurally, coal is also a good story in Mongolia because of China's move away from dirty coal to more cleaner coal, where Mongolia has a comparative advantage. So you have seen the coal market already benefit quite a lot from that and we feel that this is set to continue over the medium-term. And also copper, I think, given the -- you know, it's very dependent of course on China, but given the strong construction demands from China I think it's also a relatively sanguine outlook with a lot of volatility around us, which is why the program tries to build very big buffers in reserves in the fiscal accounts so that the economy can withstand this global volatility of the commodity markets without being derailed.

MR. KANG: On Indonesia, I think the economy continues to perform well, supported by sound macro policies and continued structural reforms. We project growth will remain strong, rising from 5.3 percent this year to 5.5 percent next year, driven by higher exports and investment. Inflation is seen to be manageable at around 3 percent and with the current account deficit below 2 percent of GDP.

Notwithstanding this positive outlook, we do see the balance of risk tilted to the downside, mainly external. They include a reversal in capital flows, slower growth in China, and of course a shift to inward looking policies globally. Domestic risks include tax revenue shortfalls and tighter global financial conditions should the normalization of monetary policy in advanced economies spill over to raise domestic interest rates.

Given the favorable economic outlook, now is the time to enact fiscal and structural reforms in order to maintain the growth momentum. I think fiscal policy is appropriately geared toward rebuilding fiscal buffers. And here we would welcome the measures in the budget to rebalance spending away from untargeted subsidies and unproductive spending toward social spending and infrastructure. At the same time, there is a critical need to put in palce a medium-term revenue strategy to raise Indonesia's low tax to GDP ratio at about 10 percent of GDP in order to generate the resources to expand spending in health, education, and infrastructure.

And, finally, on structural reforms, here we put the priority on labor market reforms to expand employment opportunity for a young and growing labor force, the need to improve the business environment by streamlining and harmonizing complex regulation, and product market reforms to enhance Indonesia's transition away from being a commodity exporter to a more service oriented and innovation drive economy.

MS. YAN: Thank you. Gentleman in the first row.

QUESTIONER: Thank you. A question for Odd Per Brekk, please. Odd Per, the political scandals in Japan, does that alter your view for the trajectory of the economy, of do you think it might impact in the coming months?

Thank you.

QUESTIONER: Thank you. My question is on the geopolitical factor. As you know, there was a big progress between South and North Korea on the denuclearization. They started their talks under the water. How is the progress of -- the denuclearization progress?

And I have two questions on that. First, do you have any plan to -- same kind of plan to help and organize some task force to help North Korea? And, then, if so, what kind of progress will that be -- even though North Korea is not a member of the IMF. If you wanted to help in North Korea, North Korea maybe have to submit materials to the IMF economic data. It is very critical to North Korea maybe. What kind of policy do you have? Thank you.

MS. YAN: Thank you. Let’s take one more. The lady in the fourth row here, thank you.

QUESTIONER: Thank you. IMF upgraded the US economic outlook mainly because of tax reform. I was just wondering what is the spillover of the U.S. tax reform on other Asian economies and especially on larger economies like China and Japan. My second question is about the U.S. restricting Chinese investment especially in the tech area recently. What are your thoughts on this? Thank you.

MS. YAN: Thank you.

MR. BREKK: Okay thank you. While we have no comments on political issues. In terms of economic policies though, Japan needs to continue with its appropriate fiscal monetary policies and supporting the structure reforms. But maybe I can take this opportunity to comment a bit more broadly on Abenomics because it is at the five-year mark so it might be an opportune time to do that.

I think on that, we want to make three points on Abenomics at the five-year mark. First of all, we think it remains and appropriate strategy for Japan to address Japan’s longstanding problems of low growth and inflation, high public debt and demographic headwinds. The second point, the strategy has clearly delivered results in terms of incomes and employment including higher labor force participation of women and elderly workers, the strongest growth in employment record for the last two decades, if not more. Now, of course, it is true that the recent targets were not met within the ambitious timeframe, and this is true for inflation especially, but we see forward momentum now. The inflation numbers for March came out today. They are in line with the gradual increase that we have been seeing in inflation over the last year or so. This is happening despite the entrenched expectations and structural rigidities. I think when you look at Japan, you have to realize this was never going to be a sprint given Japan’s decades long stagnation, but rather a sustained effort to change mindsets and practices. So the second point is Abenomics has been delivering results.

The third point, with this in mind, a continuation and intensification of the current strategy is the way forward. Here we have stressed that Japan needs a mutually reinforcing package of one accelerated structural reforms with a particular focus on labor market reforms. Here the government’s work-style reform that was launched in March last year is a very important step in the right direction. We’re now looking forward to the legislation being passed in the Diet. Second element, coordinated demand and the income policies. Third element, strengthen economic policy frameworks and here, particularly important, is a clearly defined medium-term fiscal adjustment strategy. In that regard, we look forward to the outcome of the ongoing fiscal review. We should expect to see by the middle of this year. Final point, and has financial sector policy so that financial sector can play its role in channeling resources to productive uses. Thank you.

MR. RODLAUER: When we talk about the outlook for the region and globally, we always mention geopolitical risks as a key downside risk. Obviously the North Korean situation was one of those risks. Therefore, the Fund as others are on the record to say that peaceful resolution of that risk is very important and would be very helpful to the outlook. Still it is premature to talk about economic plans or assistance in that context at the IMF.

MR. RHEE: More specifications about what IMF can be doing. Our major stakeholders have an agreement that there are many ways that we can be engaged. I think as Markus said, at this point, it is a little premature to discuss that possibility. We really hope that situation improves and our main stakeholders can approach us to discuss what kind of options we can do.

As for the impact to U.S. tax policy to the Asian region, we can think about that issue through various channels. One is the growth impact in the short term and medium term, and then also the possibility of tax competition, and also the impact of the repatriation of the U.S. profit abroad. As for the growth impact, actually we did some simulations. Our result shows that the current U.S. tax reform package will increase the level of GDP in Asia by 0.1 or 0.2 percent depending on the countries for the next three years accumulatively. So level of the GDP increase by 0.2 percent on average in the next three years. That is kind of not very big, but it is also not very small, and that increase was already incorporated in our baseline growth forecast that we just released. It is already incorporated.

In the longer term, because we are projecting the U.S. fiscal deficit, it may increase a higher interest rate and it has an impact on the FX rate. That may increase medium vulnerability but that has to be taken into consideration in the future. Definitely, now the U.S. nominal tax rate is reduced to 21 percent. It has moved back to the average OECD countries and actually that is very close to the average of corporate income tax rate in Asia too. On the other hand, the U.S. has its own state tax around 6 percent. So considering both federal tax rate and the state tax rate, still, I think, by the level itself is still higher than the average corporate income tax rate in Asia. Having said that, because you have movement from the U.S. worldwide system to the territorial system that can definitely cause a tax competition among Asian countries and Asian countries with other countries in the region.

As for the repatriation of the U.S. profits on growth, I think Asia has gained a significant corporate profit that U.S. companies of about 6 percent in their own profit growth. Europe has more than half, Asia is around 16 percent and 20 percent. We don’t have data but there is some evidence that those profits are already invested in U.S. assets and also that definitely departed to major financial sectors. Also, this unrepatriated profit can be repatriated during the next eight years. Overall, we believe that impact on the financial market and the exchange rate should be limited given the size and given the period they can repatriate.

Overall, if I summarize, U.S. tax reform has a very positive impact in Asia in the short term but we have to look at the medium risk through the financial market.

MS. YAN: Thank you. Let me turn to our online media center. We’ve got many questions. Let me take one here. This is a question on Nepal. Nepal is observing slowdown in remittent growth while the country has not attracted much FDI whereas the input bill is rising at an alarming rate. Balance of payment is slipping into deficit. Growth likely through average in 2018. What needs to be done to improve?

MR. KANG: On the question on Nepal, growth did rebound in 2016/2017 to about 7.5 percent following the impact of the earthquake and trade disruptions. Inflation has risen to about 5 percent in February but mainly driven by food price inflation.

That being said, looking ahead, growth is expected to moderate in our forecast to around 5 percent. With the medium-term outlook very much dependent on the needed reforms in order to strengthen key institutions and promote investment and social inclusion. The risks that we see are mainly on the downside and they relate to the implementation of the new framework for federal fiscal relations as well as vulnerabilities in the banking sector.

So in terms of what needs to be done in order to restore robust growth in Nepal, the include strengthening the key institutions and administrative capacity of the government to address its chronic under-implementation of the budget. This should be done through careful planning, prioritization and improvements to remove impediments to capital spending. To implement fully, the fiscal decentralization plan through intergovernmental fiscal arrangements as well as to effectively implement the new interest rate corridor for monetary policy. Finally, we highlight the need to accelerate financial sector reforms through stronger supervision in an upgrade of banks risk management.

MS. YAN: Let’s conclude the press conference by taking one more last question here in the room, if we have any.

QUESTIONER: Thank you. Once again, let me ask a question about trade. A lot of people are talking about tension between the United States and China. My question is, WEO actually says its trade tensions intensifies if Europe and Asia do not take actions. So what kind of recommendations do you suggest for Asian countries, particularly we have a lot of trade surplus. On the other hand, as an aging society, we don’t expect much to consumptions. What kind of concrete proposal would you like to make. Thank you.

MR. RHEE: I think this week we have repeated our messages. I think it is trade tension need to be resolved through multilateralism and rule-based system that we already have. Resorting to the bilateral mechanism, there will be no winners in this so-called trade war. Having said that, I think we have a very specific recommendation to Asian countries which has endured surplus. Because Asia has benefited a lot by global trading system. In some sense, Asia also has to contribute to protecting and upgrading the current trade system, multilateralism especially. The recommendations are quite specific to each country. For example, several countries can use more kind of fiscal policies if they have room to engage in fiscal policies, so increase domestic demand. So yes, the policy objective should not be just for the external sector but at the end when there is an output gap and there is room for the fiscal resources. They can rely on the fiscal resources to enhance the quality of growth together with addressing these external issues too.

Relying on the more flexible exchange rate system is another recommendation. Also, depending on each country’s circumstance -- there can be many trade distortions still we have. It is not just to rebalance the trade surplus or deficit, for their own medium-term growth, I think the opening trade sectors can actually improve their productivity. Also if you look at many Asian countries, especially goods sectors, trade of goods has improved a lot in the last 20 years. But if you look at the service sector market, Asia is much more tightly closed compared with other regions. The service sector is a new engine of growth given this digital economy and the technology changes. So there are many reasons for Asian economies to focus more on the opening of the service sector market.

There are other investment considerations such as protecting the intellectual property right and investment protection and the technology transfer regime. There is a lot of room where Asia can improve by showing the example and by more proactively engaging those activities, Asia can show that they really protect in a multilateral regime which benefits the growth in the last couple of decades. I believe that there are many policies and many reforms that Asian countries can do it depending on their own circumstances. That can actually contribute to this kind of trade tension globally.

MS. YAN: Thank you. So I would like to remind you again, as ChangYong said, we will be launching the 2018 Asia and Pacific Regional Economic Outlook on May 9th in Hong Kong SAR. Please stay tuned and with that, let me conclude this press conference. Thank you very much for your time. Have a nice day.

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