REUTERS - Southeast Asia's emerging economies face no fundamental risks as the United States central bank scales back its monetary stimulus but must manage volatility as funds flow out, Singapore's Finance Minister Tharman Shanmugaratnam said on Wednesday.
The region is "fundamentally more resilient" and its banking systems are far stronger than before the 1997-98 Asian financial crisis, said Mr Tharman, who is also chairman of the International Monetary Fund's (IMF) policy steering committee and chairman of Singapore's central bank.
"Both the injection of liquidity that came with quantitative easing and the potential withdrawal are discomforts but are not going to pose fundamental risks," he told Reuters.
"No one was very comfortable with the liquidity injection to begin with. That's why we have, not just in Singapore but in some of the regional economies, efforts to put a brake on domestic property market prices, put a brake generally on credit creation," he said in an interview.
But policymakers will have to minimise the volatility as investors pull funds from emerging markets in anticipation that the US Federal Reserve will soon begin rolling back its stimulus measures, said Mr Tharman.
Mr Tharman also warned that financial markets "may be a little too optimistic" about the extent of the US recovery as it was not yet clear whether the world's largest economy will get back to sustainable growth of 2.5 per cent or higher.
Turning to China, Mr Tharman said underlying growth remains fairly resilient, although there would be "wobbles" as it shifts toward an economic model that is more dependent on domestic consumption and services and less on investments.
"In proportionate terms, you're really not talking about a wild swing in the economy. You are talking about a percentage point difference on top of what is a base of at least 7 per cent growth," he said.
"The Chinese consumer is still consuming and consuming more each year," Mr Tharman said. "China's growth is something that everyone is watching because it has significant multipliers for the rest of Asia."