Refinitiv Newscasts - IMF releases Regional Economic Outlook for Asia and Pacific 1

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02/05/2023 05:12

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Source: Reuters

Description: The International Monetary Fund (IMF) will release the Regional
Economic Outlook (REO) for Asia and Pacific with a news briefing in Hong Kong.
Short Link: https://refini.tv/427cN7u

Video Transcript:

>> Good morning, everyone. Welcome to this IMF press briefing on the Regional
Economic Outlook on Asia and Pacific. My name is Ting Yan, senior Press
Officer at the IMF. Joining me today are our two speakers from Asia Pacific
Department. We have Krishna Srinivasan, Director of the Asia Pacific
Department and also Deputy Director Thomas Helbing. It's a great pleasure for
us to launch this report here in Hong Kong and see everyone in person. Today,
Krishna will start with some opening remarks and then we'll be happy to take
your questions. With that, Krishna the floor is yours. >> Thank you, Ting.
Good morning everyone here in Hong Kong. It's nice to be with you in person
after several years of virtual engagement. Thank you very much for joining our
event, which is where we launch our regional economic outlook for Asia and
Pacific. Just a little bit of backdrop. Global growth is expected to be
deteriorate and bottom out in 2023. A rising interest rates and Russia's war
in Ukraine wheel activity. Global inflation is easing but remains stubbornly
high. And banking strains in the US and Europe have injected greater
uncertainty in an already complex landscape. But again, [inaudible 00:01:41]
we're challenging here for the world economy, Asia and Pacific remains a
dynamic region. So here are good forecasts which you are familiar with by now.
These were released to illustrate meetings in Washington DC. Now, Asia's
domestic demand has so far remained strong despite conflict tightening, while
external appetite for technology products and other exports is weakening.
Growth In Asia and the Pacific is expected to increase to 4.6% this year, up
from 3.8% in 2022. The biggest driver of Asian upward protrusion this year is
China, while other emerging economies in the region are upfront to enjoy solid
growth. In some cases, a slightly lower rates than seen last year. So you're
familiar with these numbers, so I won't repeat the numbers here; but what do
these forecasts mean? It means that Asia and Pacific is driving global growth.
The countries in the region are combined to account for about 70% of global
growth in 2023. This is a much larger share than we've seen in the past few
years. And just two countries, India and China, account for about 50% of
global growth. Now, going beyond the forecast, let me focus on a few countries
where things are pretty dire. Let me start by discussing China, where the
reopening of the economy will provide fresh momentum for the region's growth.
The Chinese economy is expected to expand by 5.2% in 2023. And data from the
first quarter have confirmed our forecasts are dynamic start in 2023 with a
strong rebound in consumption as you can see in the chart on the left-hand
side. At the same time, the property sector is recovering more slowly and is
expected to remain subdued, and you can see that in the chart. Looking
forward, PMI surveys are showing a relatively strong expansion activity with
the recovery expected to be led by services. I know that the PMI for
manufacturing came out less than what we all expected, but notwithstanding
that, the dynamism of the Chinese economy is pretty strong. So the good
prospects provides a real momentum for [inaudible 00:04:27] growth in the
region. The strong growth in China is behind our division in this addition of
view, with growth divided by 0.8 percentage points in 2023. You can see the
left-hand side chart where we compare our numbers from the April 2023 world
economic outlook and the October 2022 world economic outlook, and you can see
that we have revised our numbers for China from 4.4-5.2%. Now, we see this
goosing growth in regional trading partners. Normally, the strongest below
from China would be from its demand for investment goods but this time, the
biggest effect is coming from consumption. We estimate that this will generate
strong spillovers than what we've seen in the past. One group that stands to
benefit the most, are neighboring countries with large tourism sectors where
the return of visitors from mainland China will provide an important rules. As
you can see on the right-hand side, countries that rely a lot on Chinese
tourists will benefit a lot from China's uptick in growth. The chart shows
that this time around consumption and not investment is leading prospects in
China. Now, what do you see beyond growth? Inflation, we find to be stickier
than expected. Now, to be fair, headline inflation has been easing in Asia and
elsewhere, but it remains above target in most economies in the region. As
commodity prices recede, core inflation is becoming a more important driver of
inland inflation and is going to be more sticky. Output gaps for Asian
economies are either closing or already closed and considered mutations as
last year is passing through the domestic prices. So these two factors explain
why we think inflation is going to be sticky. One, output gaps are closing and
Number 2, fast food from depreciation is going to linger on for some time.
Now, these factors put together suggests that the battle to contain inflation
is not yet over. And yet monetary tightening has slowed down or are hesitant
to pause in most countries in the region. Given there's still substantial
inflation risk, we think monetary policy in the region will need to remain
tight until inflation falls directly back to target. So monetary policy has to
be tightened for longer. The exceptions on China and Japan, where output is
below potential and inflation expectations have stayed muted. Now, what does
it mean for fiscal policy? In general, debt in Asia has risen and this has
implications for the fiscal policy starts. And we believe that fiscal policy
may need to take further to stabilize debt. There's a risk associated with
high debt and rising interest rates. Public debt levels in the region have
increased significantly compared to pre-pandemic. Most governments in the
region are expected to tightening budgets this year and the next. However, the
predicted consolidation may not be enough to stabilize debt, particularly
since interest rates are made the debt burden even more on homeless. Fiscal
consolidation may need to be more aggressive to ensure sustainability over the
medium-term, but policy-makers must strike a balance between supporting drops,
predicting the vulnerable, and addressing debt concerns. Beyond public debt,
elevated debt burdens and the corporate and household sectors give rise of
pockets at the national vulnerability in Asia Pacific, careful monitoring of
market risks and corporate credit risk exposure in the financial sector is
essential for safeguarding financial stability. Let me finish with this last
slide here, it's about financial risks. The global banking stress had a
limited impact on Asian markets so far. The exposures of Asian banks and
investors to Silicon Valley Bank with minimum. Equity prices for Asian Banks
have been resilient and have had largely been in the losses following the
global sell off at a time with the failure of the Silicon Valley Bank. There
are even some signs of loosening financial conditions in the region. As
markets reprice the path for the federal funds rate, the US has fallen
substantially. This has led to use audition local currency bonds to fall at a
strengthening of Asian currencies. Still, pockets of private sectors,
financial stress maybe emerging due to factors have increased leverage and
risks from the real estate sector. Asian financial system should be able to
withstand the stresses being well capitalized and with strong liquidity
buffers, but financial supervisors will need to remain alert. With that
result, happy to answer your questions. Thank you. >> Thank you very much
Krishna. Now we're happy to take your questions. If you have any questions,
please raise your hands, identify yourself, with named and medial organization
and try to be quick. Here, the gentleman in the second row, please. >> Thank
you. Good morning. My name is John Dean and from China Central Television,
Asia Pacific theory. So my question is currently people enjoyed the land,
public holiday China and the holiday economy in China is good. We also say the
half holiday would normally also reflects that the Chinese can obviously very
active right now. So what's your comment on that? And also, we know the
Chinese economics, long term positive develop in the future. So what is the
significance to the global economic recovery? Thank you. My question goes to
Krishna Srinivasan. Thank you. >> Thank you. I want to take a little bit of
the question and then my colleague, Thomas Helbing, who go overseas China,
will take on some of the other part of the question. So you're absolutely
right that in terms of what we've seen in China [inaudible 00:11:14] is a
rebounded consumption. There was chart that just show it in my slides, but you
can clearly see quarter one consumption explains a lot of the group. And
that's partly because during the pandemic, consumption was significantly
depressed. People who are saving a lot, consuming less. Now the economy
opening up, mobility rising, you're going to see an increase in consumption.
In fact, a lot of the pickup in growth this year with 5.2% dimension is based
on consumption and recovery. This compared to the past where usually when
growth in China was strong, it was led by investment. This time we see a
shift. This also speaks at one wants to make durable. You don't need the pass
we have say that for China's growth to be strong and durable, there has to be
rebalancing away from investment towards consumption. The big question is,
this year we predicted to be led by consumption, will that continue going
forward? Because that'll be important when ensure strong and sustainable
growth in China. Your second question was, how does that affect the region?
Again, a point I'd like to make is, inflammation growth or inflammation trade
is 50%. In other words, countries in Asia, when the export on Irish 50% is
within the region, and China is a key player there. So the extend that China
is rebounding, you're going to see a strong impact on the rest of the region.
And it's going to affect those countries this time around, which export
directly consumption or final consumption goods in China. Number two, those
countries which depend on Chinese tourism, like for example, I just came back
from Cambodia and Vietnam, those conditions will benefit a lot more from
China's uptaking growth. Compared to the past where investment led growth was
a key reason, countries which export many loops and so on so forth, will make
things less this time around from the growth in China. Thank you. You're
welcome, Thomas Helbing. >> Thank you. Maybe just to add in the medium-term,
of course there are a number of factors at work. Two factors we have
highlighted: one has been weakened productivity growth, second, an aging
population, which will weigh on the intern growth. On the other hand, China
also has opportunities and policies to strength medium-term growth. I think
now where China is an important part to support growth will be to support
innovation and new technologies and other measures to strengthen productivity
and then measures to slow down the impact of the aging population over labor
force, such as raising retirement age or strengthening education, human
capital. Thank you. >> I'll just add one thing to what Thomas said, we have
revised long-term growth numbers for China to 3.4% in the absence of reforms
which was Thomas talked about. If China and embarks on those reforms, then
long-term growth could be one percentage point higher, if those reforms which
Thomas mentioned a kind of growth. >> Thank you Krishna and Thomas. Second
from making a statement on the [inaudible 00:14:50] please. >> Hi. [inaudible
00:14:54] . So I just have a question. We've seen over the last couple of days
and signs that maybe there might be more programs policies needed in China.
After all the factory TMI figures that come on Sunday where as you said,
what's the expected, although it's not standing still. I've seen quite a lot
of growth this year. We just saw something from the book here on Friday,
saying the recovery is still needs some additional work, and that demand has
been insufficient. I mean, are you at all concerned right now about the
sustainability of the economic recovery in China despite the strong first
quarter of it on whether that demand is going to continue and turn into
something that can keep that trajectory going through the rest of the year? >>
Thank you. So yes we have got 5.2% and you're right that the TMI numbers which
came out yesterday or day before, wasn't as strong as one expected. The theme
and train figures came out very high. So one can't read too much into weekly
and monthly numbers, but we do expect go to 5.2%. I think there are risks to
growth in both ways. There's uptake potential and their downside risk. I would
say that China has the policy space, can keep monetary policy accommodated
because inflation is still very much absent or very much mutate. It also has a
physical space to provide support. I think going beyond just policies, I think
what you need is to limit the downside risks, which is to address the problems
in the property sector more comprehensively. Because as we identify in our
region in outlook, one of the risks to the Chinese economy it relates to the
property sector, and addressing that in a comprehensive way would be really a
very important. Maybe in that, Thomas can give you a little bit of idea on
what other areas where we can push on property sectors. >> Thank you Krishna.
Just elaborating on that, on the property sector, the government has stepped
up measures since last fall. A lot of dimensions have focused on boosting
financing to developers to complete incomplete housing or pre-sold housing and
support developers. In our view, this has benefited the strong developers. It
has helped the market stabilized at relatively low levels. What remains to be
addressed are the weaker developers which are still softining, and also the
status of the pre-sell but incomplete housing stock, which is waiting on
household confidence and sentiment in the market. And there we have argued
that the government should more proactively support restructuring of weak
developers and also off the property that has been resolved and not yet
completed. Thank you. >> Thank you. The lady in the third row, please. >> So
thanks very much [inaudible 00:18:09]. Just wanted to follow-up on Krishna,
one of your comment. Thank you very much on your comment on consumption has
been shifted to the fore and driving economic growth in China but one thing I
wanted to still ask is, you mentioned how the countries that have
traditionally export minerals to China might not benefit as much this time
around. I'm just wondering, what is the main reason for this? Is there any
pricing reason, any inflation coming to play? The last question that I have
will be in Japan. Recently, the government definitely has mentioned that they
are going to stick with new cost control, they're going to stick with easing
[inaudible 00:18:49]. So you report mentioning that Japan and China being two
exceptions, that they shouldn't embark on tightening. For Japan, in other
words, did you agree with the recent government's latest recent comment and
this rationale for sticking with it. And what would be your particular reason
for Japan as an exemption from IMF's perspective? >> Thank you. Very good
question. So when I said that countries which export minerals won't better so
much, that relates to the first point I made where typically or historically,
there's an uptick in China's growth, it's being led by large-scale
infrastructure investment and so on, which depends on things like minerals and
oil and so on, so forth. And so that provides a fill up to these countries,
which export those. And that's where you would see the country is benefiting
but this time around because it's being driven by consumption, we're going to
see countries which export directly consumable goods benefit more. That's what
will be happening. On Japan, let me make a few points there. One is, in the
case of Japan, you do have both upside risks of inflation and downside risks
of inflation. What do I mean by that? In the sense that if you look at the
recent Shinto negotiation renegotiations, there'll be more upside to it that
won't be expected. So that puts upward pressure on prices, but we expect
prices to come below the 2% by 2024. And historically, what we've seen is,
prices go up and they come down within the target very soon. So the question
here is, if you have prices inflation currently at the target, then you think
you have reached whatever goal you have kept for yourself. Given the fact that
inflation generally over the longer-term come back to below target and is
expected to come below target by 2024, what we've argued for is greater
flexibility. Because it's upside risk inflation, because of Shinto negotiation
and so on, they should allow greater flexibility in this. And that's what
we've discussed with them through the article for consultation. We've talked
about other measures they could do in terms of, if they had to move from
accomodate a monetary policy to more demobilizing monetary policy, then having
flexibility in the yields would be one way of doing that, making it less
disruptive going forward. >> Either is fine. >> Thank you. Holmes Chan from
AFP. I have two questions. Thomas, just now spoke about that China's housing
market. To what extent can you elaborate on whether or not there's still a
systemic risk and how the housing now plays into IMF's view of China's
economic growth? And my second question is, what is the latest IMF view on the
economic outlook of Sri Lanka and how it compares to regional economies in
light of the 3 million IMF help to recently? Thank you. >> So in housing, as
mentioned, the government has stepped up efforts to support the sector. The
sector has stabilized, we would say, at relatively weak levels but that's the
good news. We think that has overall limited the risks. I think now what we
are concerned is that the recovery is very uneven in the market. You have in
some cities, and for strong developers, you see stabilization is not the
rebound. And you see that weaker developers and some of the weaker regions
with weaker housing markets economically weaker and perhaps larger imbalances
in the housing market. There the recovery hasn't yet taken place. So that's
what the reason why we have advocated for further policy measures just to
further limit potential risks from the innocent people. >> On your question on
Sri Lanka. Sri Lanka is a country with essential problem where you had twin
deficit. You had a large increase in fiscal deficit, putting pressure on the
external accounts, reserves falling, exchange is falling. And so the fund for
fund supporter program, which was approved by the board not too long ago. And
that places emphasis on one, macroeconomic stabilization, bringing inflation
down. Again, the fiscal consolidation is based on revenue based consolidation.
That's partly because Sri Lanka has among the lowest in terms of revenue
mobilization, tax collection. And that goes back to the policy of the state
they made pre pandemic where they cut taxes across the board, whether it's
VAT, corporate tax, and personal income tax. So the fund supported program is
the revenue based consolidation, which provides stability to the economy. It
also wants to rein in inflation, which went through the roof. It addresses
governance and corruption issues in Sri Lanka. It's the first country in Asia
which has had a deep diagnostic on the issue of governance and corruption and
that will feed into the program going forward. It's also a program where we
have a flaw on how the country should support the poor and the vulnerable. And
to make sure that the fiscal support they provide is temporary and targeted to
the people who need it most. So it's a very comprehensive program. And the
fiscal consolidation by itself will not be enough. The next step for them is
to embark, make good faith efforts to reach a debt agreement with their
creditors; private creditors, official creditors, and so on. In terms of
growth outlook itself, we had a contraction of 8.7% in 2022. We have growth
contracting at 3% in 2023. And then making mild recovery but the issue will be
for Sri Lanka to implement the program well, so that debt can be made
sustainable, which is the big difference from the last previous programs. And
the country can be put back on the path to prosperity. >> Thank you. Since
we're on Sri Lanka we actually received two questions from Local Media Hero
news. So [inaudible 00:25:47] is asking, will Sri Lanka emerge from the
harsher sooner rather than expected as current inflation has declined faster.
And his second question is, what's the importance of restructuring local debt
to go ahead with the current environment of the economy? >> Thank you. Again,
inflation has come down from higher levels. So this is again, a work in
progress. Inflation has to come down durably. Because let's not forget,
inflation is a worst tax on the poor and the poor and the vulnerable are
hurting the most. And so you want the inflation under control. And so that's
something which again, in terms of monetary policy, with support of fiscal
policy, it has to bring inflation down to levels which are reasonable. In
terms of restructuring, as you all know, the debt in Sri Lanka was assessed to
be unsustainable. And that's why before the program could be approved, there
had to be a reason, there had to be a path towards restroring sustainability.
And that includes restructuring debt to all creditors; private creditors,
official creditors, and to some extent, domestically, it's quite a big
challenge in Sri Lanka. But when you restructure domestically, you got to make
sure that you also safeguard financial stability. So these are issues on which
the government is currently working and it will flesh out a strategy on that
hopefully very soon. That's the next step. >> Thank you. The gentleman, yes,
in the back. >> Thank you. [inaudible 00:27:30] My question is also on China
[inaudible 00:27:35]. So how do you see the [inaudible 00:27:43] funds and
deteriorating finances or proper government. Thank you. >> [inaudible
00:27:51] >> Sorry. Could you repeat the second part of the question? You
mentioned local government finance? >> [inaudible 00:28:12] it is increasing
and the deteriorating finances or local government such as, [inaudible
00:28:20] dealing with bank debt to benefit all. Thank you. >> So financial
stability risks, I think they have so far not being any strong signs of larger
non-performing loans. Part of the reason for that is our forbearance measures
by the government during the pandemic to facilitate the adjustment of the
economy, and not worse in the downturn. As the situation normalizes on some of
these forbearance measures will gradually be phased out, we expect increasing
non-performing loans. We expect this increase to be limited and manageable for
the bigger banks. It may be more difficult for some of the smaller banks, but
the government has also stepped up supervision and is revamping the financial
regulation agency and has rolled out new measures to strengthen capital ratios
and liquidity, and we expect us in this context, we will also address how
banks results the resolution of non-performing loans. As you mentioned, with
the downturn in the real estate sector, some of the local governments have
faced increased pressures. These have been so far addressed mostly as the
local level. We have allocated that in some cases, as for the restructuring,
that some of the impetus needs to come from the national government to resolve
some of the tensions and give guidelines on how to do restructuring and
possibly temporarily support local governments. We will pick this up on our
next visit to China in May. Thank you. >> Thank you. >> Hello, some questions
from outage case. So the Hong Kong government just announced the first-quarter
GDP growth of Hong Kong is 2.7%. So do you think this is according to the
IMF's expectation and also the IMF reduce the growth projection of Hong Kong's
GDP in 2023 to 3.5%. What is the reason behind this? And also now the Hong
Kong government is actively attracting Chinese tourists back to Hong Kong. Is
there any adjustment room for the growth projection for Hong Kong's 2033 GDP?
And the final question is why the Asia Pacific region is especially resilient
to the current banking crisis in the US? Thank you. >> So on Hong Kong, I was
wondering about acute GDP. We haven't looked at the data yet as it has just
come out but overall, I would note that for our annual growth we upgraded
that. Most recently, we've all released our staff report for consultation with
Hong Kong very soon. So 3.5% is an upgrade relative to what we have last year
in October. And overall, we see the recovery, the rebound on track. As in the
case of China, we think after the pandemic, some of the restrictions that
particularly apply to households with the reopening of the border with the
easing of mobility restrictions. There will be a strong rebound in consumption
in household related activity that we still see on track. >> Question. The
second question, I think it's fair to say that the direct exposure or
financial institutions in Asia to the institution affected both in the US and
Europe has been limited. And that partly explains why they have not been
affected by the turmoil in the US and Europe. Also, I think the policy
measures taken in those countries were pretty strong, which has somewhat quite
a market sentiment. That said, I would say that leverage, like as I mentioned,
private debt or debt overall in Asia has risen quite sharply from pre-pandemic
to now. So what has to be careful and that's our advice to countries is to
monitor balance sheets. They carefully monitor risks very carefully. Because
as we have mentioned. As a world, we have, it proceeds for loop for very long
time. Compared to now, we have moved to much higher interest rates. So where
these risks are headed is something which we have to be humble about and
knowing exactly where we are. So it's important for central banks, for British
authorities to monitor these risks carefully and address them head-on when
they see them. >> Hi, this is Della from Hong Kong Journal. I have two
questions. Firstly, I would like to follow up on the outlook for China
economy, especially on US-China tensions. Most recently export controls on
China and also latest on the AI technology etc. So how weight for China and
going forward and how will we hope? And my second question is on follow up on
Hong Kong's economy, so what do you think are the risk of contention once I
reach for Hong Kong economy. Thank you. >> The first question. I think the
issue that you touched upon is something which we'll be talking about quite
loudly, which is issue of fragmentation. We see that starting from rising
create uncertainty to actual data's been a US and China. They've been in Korea
and following the war in Ukraine. This being the risk of fragmentation of
countries not wanting to treat each other. Various reasons for undercutting
trade have risen and we've done a lot of work on this in our world economic
outlook and if fragmentation goes wrong, then the losses could be as high as
7% of global output. That could be a permanent loss. And if you add that
technological decoupling, which is worth 5%, loss could be as high as 12%. So
if the world gets fragmented nobody wins, everybody loses. That issue which
one has to be very careful in understanding that. In the case of China, what
we've seen, I think the statistic which I code is just looking at data between
2017 and now, the impact of those targets global GDP went down to 0.4% in
2022. So these help create tensions hurt everyone and the number I gave you,
the impact on China, flexing back on US and the spillovers rest of the world.
So one of the risks we talk about, medium-term risks or long-term risks, we
talk about there's a risk of fragmentation. If fragmentation goes ahead the
way they're pointing out, then long-term growth across many parts of the world
will decline. Everybody will lose, nobody would gain and so one needs to fight
fragmentation to include multilaterals. You had a question on Hong Kong which
I'll ask Thomas to answer. >> You ask about risks to the economy. Overall, I
should say that in the April World Economic Outlook and in the regional
economic outlook, we've seen our risks as more balance and that's mainly due
to economic reopening and easing of restrictions on mobility and the world
opening. At the moment overall, we see risks as more balanced. On the downside
at the moment, we are mostly worried about external risks. There are two
elements to that. On the real side, the global economy has been slowing in the
world economic outlook, if you recall global growth is slowing this year
relative to last year. There are downside risks that could be partly stronger
impact of the monetary tightening that has already taken place including some
further tightening of credit in the United States or in the Euro area, which
could then hit Hong Kong through trade channels. There is also possibility
that some of the financial risks that could potentially materialize especially
in the advanced economies at this point, could also feed back two types of
financial conditions which also affect financial conditions in Hong Kong and
domestic demand. On the upside, we see some scope for strong pent-up demand in
Hong Kong as well as in China from which Hong Kong will benefit most directly.
>> Thank you. Do you have more questions Emily? >> Thanks. I got a couple of
questions on India. What more does India need to do to ensure that economic
grows these elevated and lighter cup of cuts and the slowing pace in exports.
And then my second question is, how much of the upcoming heatwave issues in
India that I am at factoring into economic and inflation objections. >> Thank
you. So for India, we have lowered our forecast for this year to 5.9% from
6.1%. It's a very modest revision that reflects a modest slowing consumption.
That said, financial exports or services is really going to be sharpening. So
that's a thing of big upside potential due to growth in India. Your question
was on reforms? >> [inaudible 00:39:01] >> So I have to be very honest, this
is work in progress. We have country teams actually fully internalize the
impact of climate change. I still work in Latin America and Caribbean, where
the Caribbean countries are hit very often by natural disasters. Those country
teams internalize the impact of climate risks in back of frameworks. In other
countries we do to the extent possible we can. And so that's something that's
work in progress, but yeah, it does so some extent. >> Thank you. I think we
have time for one last question. >> Here we go. >> Do you think [inaudible
00:39:45] it's a test in Hong Kong where the launch on Hong Kong long-term
economic perspective. And we know Hong Kong had changed into [inaudible
00:39:55] for last few years. Do you think that doesn't move the complaint
model in the future next year. And ultimately affect [inaudible 00:40:05] in
Hong Kong and ultimately affect the confidence of names and changing system
from Hong Kong. Thank you. >> Thank you. Number of questions, let me start
with COVID finances. So obviously like elsewhere government finances have
weakened due to the pandemic. The government has stepped up support to the
economy, to assist with the pandemic. The government now intents to reduce
that and bring the deficit back and to bring its finances back to balance.
Overall though we should note that how close government finances are still in
a very strong position it has fiscal reserves of close to 30% of GDP and it
has a very strong fiscal framework and a track record of prudent fiscal policy
overall. So just to summarize, we think what the government has done during
the pandemic was the right thing to support. Now the government is gradually
unwinding that support, which is also the right thing to do. You mentioned the
exchange rate system. Overall, we think that system has benefited Hong Kong.
It has provided a stable anchor for the economy at the financial system for
several decades. It works, so no need to change. We also think the exchange
system is on the train for a strong fundamentals, I should say, strong
government finances, as mentioned, very established and well executed
financial regulations that has kept systemic risks of pay. More broadly, a
strong economy, very flexible and resilient economy. Flexible labor markets
that have shown the ability to adjust also to external shocks so that there
would not be a need for the exchange rate to adjust. So overall, we think the
fundamentals are there and Hong Kong should continue with exchange system. And
then you have the third part of the question. >> [inaudible 00:42:32]. >>
Overall if you look at the Hong Kong's position as a financial center, I think
it's very clear and is established as continued. If we look at some of the
balance sheet data, there's no indication that there has been a change to Hong
Kong status as a financial system. Over the past few years, the pandemic and
some of the restrictions of mobility and travel have been a handicap that has
partly explained weak labor force gross. But the government is now considering
measures to strikes in the inflow of talent with the strong financial
assistance strong prospects going forward. Underneath the talent, we think the
markets will play out and talent will flow back to Hong Kong as needed. >>
Thank you very much, Thomas and Krishna. And thank you everyone for joining us
today. This concludes our press briefing