Asian policymakers must take further action to deal with domestic overheating and global commodity price pressures, ADB president Haruhiko Kuroda said at the close of the bank’s annual meeting in Hanoi on Friday.
Inflation was one of the key topics on the agenda at what Kuroda said was the ADB's best-attended annual meeting in the bank’s 44 years history, reflecting concerns over how Asia can meet a raft of short and long-term challenges facing the region.
“I do not believe that inflation will spiral in this region,” Kuroda told Emerging Markets. But, he admitted to being only “cautiously optimistic” that domestic and global upward pressures on prices could be successfully addressed through policy actions.
He said that further measures, including monetary tightening, would be needed to keep prices in check in the worst-affected countries. In a comment likely aimed at China in particular, he added that some Asian economies have leeway to allow their exchange rates to appreciate as a means of offsetting external commodity price inflation.
Kuroda’s comments came after a warning by Bill White, former chief economist of the Bank for International Settlements, who told Emerging Markets on Thursday that ultra-loose monetary policy in the developed world coupled with exchange rate inflexibility in emerging economies risked the creation of a potentially devastating global inflationary spiral.
Earlier in the week, Charles Dallara, managing director of the Institute of International Finance, told Emerging Markets that governments and central banks globally are behind the curve in tackling inflation pressures.
Addressing the legacy of this year’s meeting, Kuroda stressed the significance of the fact that high-level IMF officials and G20 representatives, led by G20 chair Christine Lagarde, met with Asian policymakers to discuss issues including global monetary reform, dealing with volatile capital flows and regional monetary integration.
Senior attendees at these meetings said that Lagarde discussed the possibility of including the Chinese renminbi, and other emerging market currencies, in the basket used to calculate the IMF’s accounting unit, its Special Drawing Rights (SDRs).
Other notable attendees suggested that Lagarde had garnered considerable support from Asian finance ministers for what could be a bid to become the next managing director of the IMF.
Kuroda declined to comment directly on whether or not he believed that Lagarde would run for the IMF top job. But he paid tribute to what he called Lagarde’s “significant contribution to making discussion on monetary affairs [during the annual meeting] meaningful and successful”.
Kuroda said that finance ministers and others among the record 4,000 delegates who attended the meeting were leaving Hanoi with a heightened awareness of the need to embark on "inclusive growth," in order to ward off possible social tensions from uneven income distribution in Asia.
They had also taken on board the need for “balanced and sustainable growth,” he said. A “major priority” for the ADB in coming months will be to secure a substantial replenishment of its soft-loans arm the Asian Development Fund (ADF), so that the bank can tackle climate change and other problems, he said.
Kuroda also justified the ADB’s decision to publish a report on Asia’s long-term economic prospects, Asia 2050, on Wednesday. Governments need to begin preparing policy measures to deal with long-term investment in infrastructure, education, health and general orientation of their economies, he said.