..Press Release................................ UNESCAP News Services

Date 31 August 2006
Press Release No: G/34/2006

Asian Governments should stay on alert for financial downturn: UNESCAP

BANGKOK (United Nations Information Services) - UNESCAP is issuing a warning to Asian governments to reduce exposure to the impact of a sudden or unexpected market downturn, urging a mood of protection and preparation rather than the celebratory atmosphere of today’s prosperity.

Asian countries have to stay alert despite the lull in financial markets recently, says UNESCAP in a new report: “The Calm Before the Storm? Managing the Risks of an Asia-Pacific Financial Downturn”.

“There are a number of new emerging risks which may lead to more stormy weather ahead,” the report warns. Threats rise from possible interest rates hikes in developed countries, oil price shocks, housing market overheating, and investor overreaction and contagion.

The region has bitter memories of the Asian financial crisis in 1997. “Countries are now in a stronger position to handle turbulence,” the report says. Governments have improved economic policies, they depend less on portfolio flows, and they have bigger foreign reserves and better banking sectors.

The report cautions that “as Asian economies are becoming more integrated into the global economy, they also face a higher risk from the constantly shifting global environment.” The report advises “it is increasingly important to build strong and flexible economies that can weather global shocks and adapt to new realities.”

Governments should focus on controlling inflation and debt, improving banking regulations, and monitoring complex financial products. Governments can be more flexible by having well functioning legal systems, more responsive labor markets, and broader social safety nets.

“Countries in the Asia-Pacific region must improve regional cooperation to lessen the impact of financial market volatility,” the report says. UNESCAP recommends strengthening existing regional cooperation schemes by making more funds available against disruptive capital movements, ramping up regional surveillance of country policies and extending these schemes to more countries.

The report is part of a series of socio-economic policy briefs on hard-hitting Asia-Pacific issues by UNESCAP available online.

Link to report: http://www.unescap.org/pdd/publications/pb/pb_6.pdf

For further information please contact:
David Lazarus, Chief, UN Information Services Bangkok
Tel: (66-2) 288-1866
Fax: (66-2) 288-1052
E-mail: unisbkk.unescap@un.org

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