recovery on its own while dealing with the impact of fiscal tightening. if the monetary support were to have been discontinued before the economy had gained adequate strength, it would have become more difficult to attain a self - sustained recovery. this is precisely why the bank has maintained its easy stance of monetary policy since september 1995. in connection with the bank ’ s current stance of monetary policy management, i would like to mention another important point. the bank aims to achieve price stability and thereby noninflationary, sustainable economic growth over a medium to long term. accordingly, it is necessary to predict economic developments and to take fully into consideration the time required for monetary policy effects to spread throughout the economy when managing monetary policy. were we to implement monetary policy merely to respond to the immediate economic condition, it may only amplify economic fluctuations. for example, when the bank takes monetary policy measures in response to immediate improvements in economic activity, this action could carry two conceivable risks. the first is the risk that at the time the economic upturn is confirmed, prices may already have started to rise. considering the time necessary for monetary policy effects to permeate throughout the economy, the central bank must act more pre - emptively, as it is too late to take action after price rises have been confirmed. the other is the risk that the strength of recovery is insufficient although economic activity may have started to improve. monetary tightening under such circumstances may impair the force of recovery that had at last started to grow. in other words, monetary tightening at this time will be premature. thus, it is extremely important that monetary policy be managed from a medium to long - term perspective. with this in mind, the bank, in its management of monetary policy, has emphasized accurate prediction of economic and price developments rather than the economic condition at the time. further, in accurately predicting these developments, the bank has focused on the strength of the self - sustained recovery in the private sector. this does not mean, however, that the bank is not carefully monitoring the potential risks arising from the prolonged easing of monetary policy. it is particularly important for the bank to constantly verify that the low interest rates are not expanding the potential risk of inflation. in the past, there were times when the effects of monetary easing amplified rapidly, increasing abruptly the risk of inflation. in view of the time needed for monetary policy effects to permeate, the task of assessing potential risk cannot be neglected. - 11 - as i stated

thailand built up large private short term external debt while high private credit growth fueled the bubble in the stock and property markets. once the crisis hit, these countries faced sharp capital reversal of up to 10 % and 12. 5 % 1 of gdp in 1998 for korea and thailand respectively and a massive devaluation of the currency soon followed. some of us were forced to seek international assistance ( imf ) or, in the case of malaysia2, to undertake rigorous self - reform and an eventual unorthodox measure on exchange and capital flows. notwithstanding the different approaches, these steps were all painful yet critical for economic recovery. by 1998, the current account balance of the four countries became positive, helping to improve the national account and restore consumer confidence. gdp growth subsequently returned to positive territory by the second quarter of 1999. two differences stand out between asia and europe. the first is policy flexibility. the devaluation of the exchange rate helped restore export competitiveness of the asian economies. however, this freedom of flexibility might not be practical for europe given its single currency setting and political complexities. the second is the supportive global economy, which provided the necessary market for asia and allowed asia to export our way out of the crisis. global gdp registered a 4. 7 % growth in 2000 with advanced economies, the world ’ s largest consumer, growing at 4. 1 %. in contrast, the global setting of the current european sovereign debt crisis is not bot ’ s staff computation from ceic data. malaysia ’ s policy mix started out with an initial fiscal and monetary tightening, a conventional imf - like measure, followed by a reversed loosening of macroeconomic policies. the insufficiency of these policies to restore confidence led the country to resort to exchange and capital control which yielded positive result. bis central bankers ’ speeches as favorable. global and advanced economies growth turned to a negative territory of 0. 6 % and 3. 4 % respectively in 2009. emerging and developing economies, increasingly feeling the pinch of the global slowdown, witnessed the continued slowdown of their gdp growth from 8. 7 % in 2007 to just 2. 8 % in 2009. i believe that there may be other success factors for the european story. but, we have to bear in mind that some of the success factors are not without costs that remain to be addressed. in the case of asia, the sharp devaluation and swift recovery in exports led the asian economies to become addicted to large volume of export at low