“You took the country from the darkest moment in its history to now being one of the fastest-growing economies in the world,” International Monetary Fund managing director Kristalina Georgieva told Prime Minister Hun Sen at the ASEAN Summit on Sunday.
Commending the premier and Cambodians for the “remarkable achievements of the last two decades,” Georgieva also pointed out Hun Sen’s efforts in “dramatically” reducing poverty, improving living standards and aspiring to be an upper-middle income country by the end of this decade.
However, she expressed concerns over the global economic condition, particularly increased fragmentation, at a time when “we need each other the most”.
“And I am very concerned that we may be sleepwalking into a world that would be poorer and less secure as a result,” she said.
In ASEAN though, Georgieva finds that steady progress on reforms by member states and economic integration might drive gross domestic product (GDP) growth at five percent this year, albeit with a moderation, above global average, at 4.7 percent in 2023.
Calling ASEAN a “relative bright spot on a dark horizon,” the IMF head said this is the reason why she believes it would be a “key player to prevent fragmentation” and encourage the world to stay on the right path.
To ride the worsening conditions expected in 2023, she outlined three policy priorities for ASEAN including fighting “stubborn” inflation, ensuring prudent fiscal policy and capturing supply chain opportunities.
Georgieva said although ASEAN’s prospects are promising, there is “no room for complacency”, adding that member states must draw up the policies within the context of the crisis and in recognition of the “scarring” from the pandemic.
Mapping out the first priority, which is to curb inflation, she said, central banks must tighten and “do so until there is a tangible reduction in inflation”.
“This is the right thing to do because price stability is fundamental for growth. We also know that inflation hurts the poorest people most,” Georgieva said.
The IMF expects major central banks, including the Federal Reserve, to continue tightening, therefore it is “not going to be a short-lived phenomenon”.
She urged countries to take this into account in their own monetary and exchange rate policies, while also recognising that the “strong dollar comes with these high interest rates”.
Her second priority involves prudent fiscal policies that help segments of the society, which might be hurting more than the others. This is necessary because “you do not know how long scarce public resources might be called upon to provide that help”.
But not all is bleak, as Georgieva acknowledged there being “potentially huge opportunities” for ASEAN.
She said supply chain changes are creating new opportunities, such as those from the new green climate-resilient economy.
“Digitalisation offers another opportunity and has already led this region to higher performance, although digitalisation also carries its own risks,” she said.