Asian economies are poised for accelerated growth as the global economic crisis recedes, but recovery remains fragile and carefully calibrated policy adjustments along 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 starting today. 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% 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 timed."
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 said.
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,” this 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.
Lessons of the Crisis and Global Imbalances: Should and Can Asia Reduce its Reliance on Exports to US and Europe and Focus More on Internal (Regional) Markets?
