Asia poised for growth
But policy shifts, collective action needed:
Asian economies are poised for accelerated growth as the global
economic crisis recedes, but recovery remains fragile and carefully
calibrated policy adjustments with increased integration efforts will be
needed to sustain growth and cushion the region against future shocks,
says a new study commissioned by the Asian Development Bank (ADB).
The study, entitled Policy changes for Asia after the global
recession: Impact of the global economy and policy implications, notes
that growth in the region is set to quicken this year as the global
economy regains strength. But it also cautions that recovery in Asia is
still overly dependent on policy support from developed economies, while
a turnaround in the region's largest market, the US, has yet to gain
traction. Mobile capital flows which can cause volatility in exchange
rates and domestic liquidity also continue to pose a risk to emerging
economies in the region.
The study, prepared by the Centennial Group International, is one of
a series of reports that will be presented at a two-day regional forum
on 'The impact of the global economic and financial crisis' organized by
ADB at its headquarters in Manila, that started yesterday. Top officials
including policymakers, Finance Ministers, Heads of Central Banks,
business leaders and development experts from nearly 20 countries from
developing Asia are taking part in the forum.
Opening the forum, ADB President Haruhiko Kuroda said, "The region is
now showing signs of a V-shaped recovery, with a 6.6 percent growth
outlook for this year. While we believe developing Asia is leading the
global economic recovery, it is still too early to relax vigorous
efforts to restore demand and stabilize financial systems. In
particular, exit strategies for fiscal stimulus must be carefully
Poverty reduction will not be sustained at the pace of pre-crisis
years unless sources of growth are rebalanced toward more domestic and
regional demand, and made more inclusive. It is imperative for the
region to bring growth back to its higher trajectory to cover the lost
ground on poverty reduction, and to support global recovery, Kuroda
In a second report entitled, Policy changes for Asia after the global
recession: Long term implications for Asian economies, the study notes
that Asia should continue to strengthen cooperation in the financial
sector as a bulwark against future financial turmoil in developed
economies, but also stresses that integration efforts should be modest
in size to ensure they deliver real benefits.
"Policy makers should avoid using up scarce bureaucratic resources
and limited political goodwill on huge initiatives which do not yield
tangible benefits at the ground level but should instead focus on
smaller scale efforts," the report says.
It notes that areas where financial cooperation could be strengthened
are bilateral agreements allowing large financial institutions in one
country to expand or acquire banks in another, as well as the expansion
of sector privileges in subregions, such as Greater Mekong Subregion.
The report also advised that to support future growth, countries in
the region should increase intraregional trade and take steps to raise
productivity and their capacity for innovation. Smaller economies should
adopt policies which attract low cost manufacturers, foreign direct
investment, and tourism.