NEW YORK, April 22, 2010 – Asia will be the driving force in revitalizing the global economy, according to Dr. Jong-Wha Lee, chief economist of the Asian Development Bank.
"I reaffirm my convictions … Asia will lead the global recovery, Asia will maintain strong and stable growth," he told the audience at the Asia Society, where he discussed the findings of the ADB’s flagship publication Asian Development Outlook 2010 (ADO).
Data from the ADO show that developing Asian countries have rebounded from the global financial crisis and will achieve an average GDP growth rate of 7.5 percent in 2010 and 7.3 percent in 2011. These figures contrast sharply with the recovery being seen in major industrial economies with the United States attaining 2.4 percent GDP growth in 2010 and 2.6 percent in 2011 while the Eurozone averages 1.1 percent and 1.6 percent in the same periods.
The growth of developing Asian countries will be robust, Lee said, although the experiences of countries in the region vary greatly. Open economies like Singapore, Thailand, and Malaysia, who rely heavily on exports, were hurt in the first part of 2009 when global trade volumes declined, forcing firms to cut jobs and investments. Other countries, like China and India, were able to stimulate their economy domestically through government financed infrastructure projects. Lee did emphasize that the next challenge for almost all developing Asian countries is to shift from an export-led economy to one driven by domestic consumption.
The forecast outlined in the ADO recognizes the potential risks that could undermine developing Asia’s long-term economic stability. These risks range from a poorly timed end to stimulus plans to the influx of volatile capital. Lee was quick to point out, though, that while such risks are significant, now is the time for “prudence and disciplined fiscal and monetary policies because macroeconomic stability” is important in the post-crisis environment.
The policy challenges that now face developing Asia necessitate a strong framework for macroeconomic stability at all levels of the global economy. Lee highlighted the importance of strengthening regulation in this period before Asian financial markets start to rely more heavily on the complicated instruments that played a role in America’s financial crisis. China has already strengthened administrative measures to regulate borrowing money to buy new homes, Lee said. This policy is a small step in the right direction toward avoiding the mistakes that toppled the US economy.
But single nations cannot operate alone if developing Asia is to stabilize growth. According to Lee, the world is changing and in the next decade regional coordination should focus on policies that complement rather than contradict each other. On a global level, policy coordination should reflect the growing weight of Asian economies with, for example, the G20 becoming a more relevant forum than the G7 for international economic policy discussions.
But while Asia’s voice in the international community should increasingly be recognized, its relationship with the world should not beone-sided. “Asian countries should be more responsible to the global economy…it cannot really just get the benefit from trading with the industrial countries, you also need to contribute to the global prosperity,” he said.
Reported by Timothy Orr