The picture is, however, complicated by the exaggerated strengthening of sterling since last summer - particularly against the European currencies - which probably reflects uncertainties affecting the Continental countries at least as much as developments in our own economy. This strength of sterling poses, for the time being, a genuine monetary policy dilemma. It will lead to a fall in inflation in the short run - over the rest of this year - as import prices fall. And it makes life very difficult for UK manufacturers exposed to international competition, so that our external trade position is likely to deteriorate - and that may have a BIS Review 29/1997  -2-  longer-lasting effect on inflation. But these effects may not be enough to offset the gradual emergence of inflationary pressure looking forward to next year, stemming from continuing above-trend growth of domestic demand. On that basis we advocated a moderate tightening of policy in order to slow the domestic expansion to a pace that can be sustained in the medium and longer term. Let me be quite clear, for those who insist on over-dramatising these things, we were not calling in the Inflation Report for “an immediate interest rate hike to bring an incipient boom to a juddering halt!” I should like to think that in the present more stable environment that kind of language is anachronistic.
Diverse new sources of growth have now emerged across ASEAN, with the economies now moving beyond their traditional reliance on manufactured exports to expanding the production of resource-based products, and increasingly to the services sector and thus providing greater flexibility to respond to shifts in external demand. There has also been a rebalancing of the sources of growth between domestic and external demand. The role of private consumption has strengthened in the ASEAN economies. ASEAN now possesses a burgeoning consumer market that is valued at more than USD 330 billion. With high savings rate continuing to prevail, there is potential for this trend to be sustained. Consumption demand has also been supported by rising incomes, with GDP per capita having increased to over USD 1,500 compared to USD 1,157 in 2000. In the long-term, these trends are expected to be reinforced by the positive demographic structure in the ASEAN region. ASEAN’s population is not only large but also young with 55% at less than 30 years old and becoming increasingly urbanized. There is also greater involvement of the private sector in the economy following the period of adjustment post-crisis. Private investment which was initially slow to adjust has now shown prospects for a stronger recovery. The potential for greater investment is driven by the rising infrastructure requirements throughout the region that is estimated at USD 160 billion for the period 2006-2010. There has also been growing interest in resource-based industries.