Asia to drive world economic growth
"Asia is leading the global economic recovery," said Joseph Zveglich, the Asian Development Bank’s Assistant Chief Economist presenting the Asian Development Outlook 2011.
Asia has recovered from recession and will grow at a rate of nearly eight per cent this year and next. The Asian Development Bank (ADB) presented its report, Asian Development Outlook 2011, in Helsinki on April 11. This year’s special theme is South-South economic linkages.
"Rapid economic growth in Asia will also increase the Asian countries’ political importance. Two thirds of the world's poor live in Asia, where inequality is high. Asian wealthy countries should take greater responsibility for their part in reducing poverty. The Asian Development Bank has worked for 40 years to support the continent's poor, and Finland will continue its strong support of the Bank," said Pasi Hellman, the Deputy Director General in the Ministry for Foreign Affairs.
The report concludes that a stronger South-South cooperation will benefit developing countries' economic growth. Asian trade is expected to grow 7-9 percent in 2011-2012, and other countries will benefit from trade with Asia.
Asia's economic recovery has been impressive, with China and India in the lead. Regionally, East Asia's growth has been fastest. Thailand and Malaysia have been positive surprises in the recent years.
China’s and India’s economic growth is pulling both developing and industrialized countries to a new rise. When economic recession decreased the global trade, imports from developing Asia continued, and helped other countries in recession.
South-South trade is growing
South-South trade has grown, mainly driven by the factories of Asia. Goods are transported as parts from Asian countries to China, where they are assembled and exported to Europe and the USA.
Trade between Asia and Latin America, the Middle East and Africa is growing, but remains relatively low.
Wages are rising in China, and factory production will gradually be transferred inland where production costs are lower.
“Asian economies are threatened by rising oil and food prices, the euro zone crisis and U.S. economic problems as well as the consequences of the earthquake in Japan. Increasing food prices could also be a positive thing, if the rise will directly benefit the farmers," says Zveglich.
Rising inflation is the biggest obstacle to Asia's growth.
"As prices rise, inflation is eating the fruits of economic growth from the poor. Inflation could be reduced by flexible exchange rates, but this does not attract countries that want to maintain their economic competitiveness," says Zveglich.
How can the poorest benefit?
The panel mainly agreed with the report's conclusions. Asian growth was believed to remain strong and continue as a driving force for both developing and industrialized countries’ economies. The strengthening of the South-South economic linkages was considered as a positive thing.
The panel also discussed about how Asian economic success could be channeled into poor countries.
"Asian economies are more closely tied to each other than before. The benefits of economic growth should also be extended to the fragile and poor countries. The growth in the poorest Pacific countries has remained below two per cent and the gross national product is less than 1000 dollars," Zveglich says.
Aging of the population is a future challenge in Asia, especially in Japan and South Korea, but before long, even in China. Demographic change further underlines the importance of productivity as an engine of economic growth.
To gain the greatest benefit from South-South cooperation, barriers to trade and investment should be phased out gradually. If developing Asian countries would invest their funds in southern countries instead of saving them, the entire world economy would benefit and become more stable, the report says.
Despite the economic growth, 1.8 billion Asians live on less than two dollars a day. The Asian Development Bank supports the Asian and Pacific region in efforts to rise from poverty and improve people’s living conditions.
The ADB reduces poverty by supporting inclusive economic growth, environmentally sustainable development and regional integration.
Outi Einola-Head
Read more: