one factor that could offset this is the continuing emergence of china which has to a large extent been shielded from the downturn. at the east asia regional summit of the world economic forum held in hong kong in october of 2001, developments in the chinese economy dominated the discussions. although the emergence of china was seen as positive for the region, it was also viewed with some trepidation in some of the countries, particularly hong kong. it is an irony that the most closed economies in asia i. e. china and japan, determine the future prospects of some of the most open economies in the world. growth projections for asia were also revised down by the imf, with recovery delayed into 2002. the newly industrialised economies of asian and asean were badly affected by the lower european, japanese and us growth and the collapse of the global electronics cycle, with hong kong and singapore being particularly vulnerable, and taiwan experiencing its first recession since world war ii. these countries are only expected to grow by around 1 per cent in 2002. the forecast for the asean countries for 2002 is 2, 9 per cent, although for developing asia the forecast is 5, 6 per cent, buoyed by a 6, 8 growth forecast for china. although the outlook for this region is relatively bright, particularly given the lower dependence on external capital flows, its heavy exposure to the electronics cycle make it vulnerable to developments in that industry. 8. latin america the outlook for latin america remains overshadowed by developments in argentina, but it appears that the worst of the contagion effects appear to be over. although the argentinean crisis was not caused by the general world downturn, the satisfactory resolution of the crisis in argentina does have an implication for the general ‘ risk appetite ’ in the industrial countries, and therefore for capital flows to emerging markets in general. the adjustment in argentina is likely to be painful, and drawn - out, and is likely to remain a source of economic uncertainty and instability for some time and the recession is expected to persist through 2002. latin american growth in general is forecast to be 1, 7 per cent in 2002, with mexico having the lowest growth forecast at 1, 2 per cent ( apart form argentina ). mexico ’ s membership of nafta makes it more vulnerable to economic downturn in the us, whereas other latin american countries have greater trade exposure to europe. external financing requirements are relatively large in this region, and growth prospects will therefore be affected by a resumption of ‘ normal ’ capital flows

such a downturn. overall, i believe the lvr policy is regarded as a qualified success. while it has its critics, it has also won considerable support amongst policy makers, the public and the banks. the banks have recognised the benefit of an external industry constraint that prevents an escalation of mortgage risk as banks compete for market share through greater risk taking. i take five broad lessons from the experience with macro - prudential policy to date. first, it is a policy that can reliably improve banking system resilience, on a sustained basis, but that has limited capacity to influence asset prices. the latter should not surprise us given the wide range of factors that influence asset prices more generally. second, and arising from the first, macro - prudential policy should always have a prudential purpose, and be modest in its ambition. it should not seek to control housing or financial cycles. it should seek to build resilience to these cycles while at the same time lean against the extremities of those cycles. third, to improve transparency and understanding, macro - prudential policy should have a wellunderstood and systematic framework for policy adjustments that is fully consistent with the underlying prudential framework. fourth, there is a need to build and sustain support for the macro - prudential framework – amongst politicians, the public and the banks themselves. to succeed long term, macroprudential policy must gain broad acceptance, along the lines of monetary policy. part of the challenge here is that many observers assume the main objective of macro - prudential policy is to stabilise asset price and credit growth rather than build financial system resilience. fifth, a good infrastructure is required to support macro - prudential policy. the reserve bank has invested heavily in better measurement and analysis of housing and rural credit risk. this has had positive spin - offs for prudential policy more broadly. international experience the countries we look to for lessons about our own policy are those with similar banking systems and with a propensity for housing cycles – such as australia, canada, ireland, and the uk. the latter three have been active in macro - prudential policy for several years while australia has been a more recent starter. the experience of these countries tends to reinforce the lessons i have mentioned. in ireland, the central bank sees borrower - based macro - prudential policies as an integral part of mitigating systemic risk from housing.