BALI, Indonesia, Oct. 6 (Xinhua) -- As leaders of APEC members continue to fly in on Sunday for the two-day summit starting Monday, faltering global growth is at the top of the meeting agenda, officials said here.
Indonesia's Foreign Minister Marty Natalegawa told media ahead of the most important meeting at this year's Asia Pacific Economic Cooperation (APEC) chapter that the blueprint for discussions with leaders was drawn up at the ministerial meeting, which was held on Friday and Saturday.
Terming the discussions as "constructive," Natalegawa noted that the template for the talks were laid out after extensive meetings, which numbered more than 100 during this year with the participation of more than a 1,000 delegates from APEC members.
"Obviously global economic concerns are hugely important but there have also been other topics such as sustainable development, renewable energy, connectivity and trade facilitation included in the blueprint," he said.
Growth woes are also seen as the main topic by the APEC Policy Unit, which released an important report on the eve of the Leaders ' Meeting in Bali.
Sharp fluctuations of capital flows and possible stringent lending conditions, against the backdrop of an unstable economic recovery, requires appropriate policy measures to stabilize growth in the region, recommends the APEC Policy Support Unit in its latest report.
The discussion by the U.S. Federal Reserve about the possibility of reducing the pace of its asset purchase program occurred at a time of weaker-than-expected economic activity in some APEC emerging and developing economies, the organization said.
This resulted in an outflow of capital in some economies in the APEC region.
"Equity prices, asset prices, housing prices and the cost of borrowing were all affected by quantitative easing and then by a reversal in investor sentiment in mid-year," said APEC Secretariat Executive Director Dr. Alan Bollard at the report launch.
Moreover, the reassessment of the market on the future path of U.S. monetary policy resulted in large depreciations in almost all APEC currencies against the US dollar.
In July, the IMF revised downwards its growth forecasts for global output. World GDP is expected to grow at 3.1 percent in 2013 and 3.8 percent in 2014. In the APEC region, growth is expected to moderate from 4.1 percent in 2012 to 3.9 percent this year, before growing slightly at 4.4 percent in 2014.
Against this uncertain background, the APEC region showed uneven growth dynamics, says the Policy Unit.
"Among industrialized and newly industrialized economies, there are signs of a turnaround in economic growth, although at a moderate pace. However, growth in APEC emerging and developing economies is trending downwards," insisted APEC Policy Support Unit Director Dr. Denis Hew.
APEC emerging and developing economies have also been affected by the slowdown in global demand.
Malaysia and the Philippines recorded a contraction in their export earnings this year. In Thailand, after a strong recovery of 19.8 percent growth, the increase in exports fell to 2.7 percent in the second quarter of this year.
In China, net exports contributed to only 1.3 percent of the total GDP growth in the second quarter, a sharp slowdown from the 14.3 percent contribution the previous quarter.
Obstacles to APEC's economic recovery remain.
"One of the key areas that require attention by APEC policy makers is the impact that more costly capital will have on growth prospects," said Dr. Bollard.
He believes rising domestic lending rates could constitute a risk to the economic recovery of many APEC economies. In particular, an ultra-accommodative monetary policy stance has fueled a rapid rise in credit growth.
"Currently, domestic credit to the private sector exceeds 100 percent of GDP in more than half of APEC economies," explained Dr. Bollard.
"On the one hand, the normalization of monetary stance in large economies can help to relieve the burden from asset price inflation in some APEC economies...However, if investment and consumption are reduced, appropriate policy response will need to be taken," he said.
A normalization of monetary policy in large economies will eventually need to take place and this may potentially lead to a re-emergence of financial market disturbances, the report cautioned.
"Rising international and domestic interest rates may complicate the task of many APEC economies to re-engineer the economy towards stronger domestic demand," said Dr Hew.
"However, with appropriate policy measures, the shift in monetary stance in advanced economies should not constrain domestic demand."
The report calls for APEC policymakers and leaders to focus on a broad agenda of ensuring macroeconomic and financial stability.
In tandem, the report advocates APEC to pursue specific policies to improve the investment climate through structural reform and enhancing infrastructure as well other fiscal policies to promote greater consumer spending.