Real per capita incomes in the previously crisis affected economies (Indonesia, Korea, Malaysia, Philippines and Thailand) have significantly exceeded pre-crisis levels.” – World Bank’s “East Asia & Pacific Update – Ten Years After the Crisis” (April 2007) Asia is resilient. I am confident about Asia’s future. I do not expect military conflicts as all countries are concentrating on economic growth and building cross-national and cross-regional ties. Tensions may arise in cross-strait relations due to forthcoming elections in Taiwan but so long as the US Administration maintains its clear stand that it will not support Taiwanese independence, the situation can be managed. Terrorism remains a long-term threat but will not topple governments or drag economies down. But an avian flu pandemic will be a different threat altogether. It will tank many economies. Barring this unpredictable risk, Asia will continue to surge over the next 20 years, powered by the twin engines of China and India. The story of China is well-known and that of India becoming increasingly so. So I shall not elaborate on them. Instead, I want to remind you not to overlook the region that is strategically-positioned between these two giants – the ten Southeast Asian countries which form ASEAN. Let me elaborate. A revitalised ASEAN ASEAN is being revitalised. In response to the Asian Financial Crisis, ASEAN countries took concrete steps to tackle weaknesses in their financial and corporate sectors and implemented structural reforms. These reforms have strengthened ASEAN’s economic fundamentals and financial stability.
Yet, in the case of these countries, there is a real risk posed by speculative capital inflows. As long as negative real interest rates prevail in Europe, straying too far away from our regional peers in terms of policy rate would invite considerable appreciation pressures. While helpful in terms of taming inflation, these would not be welcome, given Romania’s increasingly significant external imbalance that is singular in the region in terms of size and trend. It owes to the faster growth of domestic absorption than that of domestic output, as well as to non-price competitiveness issues manifest in certain production sectors. Therefore, striking the right balance in terms of the interest rate differential is of the essence. After the tightening undertaken so far in Romania (including three policy rate hikes in the first half of 2018), it is probably wise to proceed cautiously in the future. 2/3  BIS central bankers' speeches  Which brings me to the last issue I would like to address: what is advisable in terms of economic policies in order to cope with any future adverse developments. For the sake of simplicity, allow me to try to formulate three general rules that are instrumental in dealing with such developments. First of all, irrespective of the possible scenarios, it is wise to put your house in order before the storm comes. One example is fiscal consolidation, which is paramount for the economy.