On the external balance, the more diversified exports and markets has allowed the balance of payments position to remain sound. Thus, despite the fall in  2  BIS central bankers’ speeches  commodity prices, the trade and current account is expected to remain positive, sustained by manufactured exports while the financial account is expected to adjust in an orderly manner. During this same period, the financial sector restructuring, rationalisation and reforms, the institutional development, the strengthening of the regulatory, supervisory and legal framework and the development of the domestic financial markets have also diversified the financial sector and has enhanced its ability to disperse external shocks throughout the system. In particular, the financial reforms also involved the transition to greater market orientation and more liberalised financial system which has allowed for greater flexibility to adjust to the effects of shifts in global liquidity. The now deep and robust financial system is also underpinned by high levels of capitalisation and sufficient levels of liquidity. This has ensured that financial intermediation continues to be effective in providing support to economic activity. It is therefore not the recent policies nor the new measures that have placed Malaysia on a stronger position to manage the external challenges. Rather it is the economic restructuring and financial reforms and development undertaken during the recent two decades and the building of several layers of buffers that has allowed us to weather the current challenging operating environment.
The most pressing challenge, therefore for the global economy, is to generate an economic recovery that is balanced and sustainable. Although the growth momentum has improved in a number of major economies, the growth has thus far been modest. In addition, weaknesses in several major economies continue to point to a global economy that remains vulnerable to downside risks. While the growth performance in most emerging economies is projected to moderate, collectively emerging market economies remain an important driver of growth of the world economy. A less robust external sector, BIS central bankers’ speeches  1  slower domestic demand and specific domestic factors are amongst the reasons for this growth performance. In Asia, the growth for 2015 is projected to be sustained at 6.4%, while growth in the ASEAN-5 is projected to be in the region of 5%. A further phenomenon affecting the global economic performance is the significant decline in global oil prices. While this has partially offset the weaker-than-expected growth momentum in some of the advanced countries, it has, in different degrees, adversely affected the oil exporting economies resulting in divergent growth performance across and within regions. Overall, however, the global economy is expected to benefit from the lower oil prices. A further recent development is the consequences of the unprecedented and divergent monetary policies being pursued in the major economies which have now resulted in significant policy spillovers to other parts of the world.