CEIC Global Economic Monitor: Asia’s Declining Exchange Reserves

Since the currency crisis in the late 1990s, most Asian countries have been accumulating foreign exchange reserves to protect against exchange rate shocks. For example, reserves in Thailand have risen by 4.3 times from August 2003 to August 2013 while most other Asian countries have at least doubled their reserves during the same period. The associated import coverage ratios in these countries have likewise followed an upward trend; import coverage is often used to evaluate the adequacy of foreign exchange reserves and by implication it provides an indication of payments default risk (a balance of payments crisis). With the exceptions of Australia, Pakistan and Vietnam, other Asian countries have reserves equivalent to at least three months of imports, a threshold which is generally seen as the minimum level to be considered safe. Brunei is the pick of the bunch, with its foreign reserves enough to pay for 26 months of imports. However, more recently, foreign exchange reserves in developing markets have declined, partly due to depreciating currencies in these countries as central banks utilise their reserves to keep their currencies stable. For instance, Indonesia has lost one-fifth of its reserves since the turn of the year. GEM Highlights
  • In July 2013, Macau, Vietnam and India saw the highest growth rates in exports, at 16.5%, 13.8% and 11.6% respectively.
  • Most North and South American countries recorded increasing rates of Household Debt as % of Nominal GDP, with the exception of United States which reported a 4.21% YoY decrease.
  • The EU average Industrial Production Index grew by 0.31% YoY in June 2013, its first positive growth rate since October 2011.
  • In the second quarter of 2013, India recorded 2.42% YoY growth in real GDP, its slowest pace in four years. On the other hand, Kyrgyzstan was able to maintain strong growth for a second consecutive quarter, at 7.9% YoY, after a year-long contraction in 2012.


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2nd October 2013 CEIC Global Economic Monitor: Asia’s Declining Exchange Reserves