India Made Many Policy Mistakes: Schwartz

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Aug. 26 (Bloomberg) -- BBVA Chief Asia Economist Stephen Schwartz discusses the Asian nations, including Indonesia and India, that are draining their foreign reserves to boost their currencies with Zeb Eckert on Bloomberg Television's "First Up." (Source: Bloomberg)

Investors pulled aliens from the region.

For more, i am joined today by stephen schwartz, the chief asia economist with a lengthy career at the imf.

Senior rest and representative for four years before moving to hong kong.

Welcome.

Thank you.

Let's talk about indonesia.

These are in the emerging market outflows situation.

Why is indonesia in better positions?

They are the two economies in the asia region who felt the brunt of the outflows.

They have similar characteristics that have exacerbated the outflows.

Both their current account deficit countries, they are struggling to improve investment climate for foreign investors, particularly on infrastructure, but indonesia is going into the capital outflow with a higher growth momentum and india.

It made better progress in recent years.

While the outflows are severe, indonesia is that are positioned.

Indonesia has a better fiscal position.

What about the reforms discussed?

Are they coming to fruition?

Do they have the conviction with which they were outlined?

The reform momentum slowed in the past two years.

The current finance minister has a clever saying.

Good times make for bad policies.

Bad times make for good policies.

Indonesia has been riding the wave after all the good things he had done in the previous decade to get the macro management in order the brunt to advance the investment climate.

In the last years, and you that's back in policies have become more nationalistic.

Class you initiate -- initially expected it to -- you initially expected it to deteriorate.

We have to at -- revise the forecast.

We have the ruby trading just below 10,000 by the end of the year.

I am not sure it will come back that fast.

Let's focus -- focus on the long-term.

Prospects are very bright.

6.5% growth over the medium term.

They can improve the investment climate will -- and slows will come back with the adjustment to that.

We are confident it will come back eventually.

You talk about policy momentum in indonesia.

It appears to be a classic example of policy gridlock.

That is why indonesia is better positioned than india.

In india, the reform momentum has been stalled for a long time because of the politics there.

It is more complicated than in india.

To the government's credit, since september, when growth began to slow, the indian government reinvigorated other forms -- reforms.

Multibrand investment, and it is doing another -- a number of other things.

It will be a long haul.

That alone will not turn around the outflows in a very quick time.

Let's finish on this.

There are a lot of people sounding alarm bells about money going out of asia.

As you look at this, given your experiences, time in indonesia and time looking across the region, how does this compare to the asian financial crisis of 1997? is that a parallel that can be made?

I do not think the environment is nearly as severe as we saw in 1997 and 1998. the region across the board have taken a number of reforms to improve their banking systems, improved data dissemination to the market, and while the similarities focus on outflows, the economy is better able to understand this.

A rocky ride, but i do not think it will tip any of the economies into crisis.

That is good news.

This text has been automatically generated. It may not be 100% accurate.

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