Despite Risks, Strong Growth for Developing Asia will Continue, Seminar Told

ISTANBUL, TURKEY (6 May 2005) - While high oil prices remain a grave threat, developing countries in Asia will experience robust growth in 2005 and continue a healthy expansion in 2006-2007, ADB Chief Economist Ifzal Ali told a seminar in Istanbul yesterday.

Mr. Ali said the economies of developing Asia and the Pacific will achieve an overall economic expansion of 6.5% to 6.9% in 2005-2007, on the back of buoyant domestic demand and further strengthening of intraregional trade.

The upbeat outlook draws on the strong growth momentum gained through spectacular economic performance in 2004, when the region registered gross domestic product (GDP) growth of 7.3%. Growth will be broad based, as intraregional trade and integration forces steer the region's economies. Developing Asia's built up strengths will enable countries to benefit from opportunities and be resilient to shocks.

However, "this is contingent on countries in the region strengthening their interdependence with industrial countries, deepening their integration within Asia, and broadening inclusiveness within countries of the region," Mr. Ali cautioned. "Developing Asia must be vigilant, as significant risks loom in spite of the positive external environment. In particular, global imbalances pose a major risk to the region, and developing Asia must be an important player in the resolution of these global imbalances."

Deutsche Bank Chief Economist Norbert Walter agreed that Asian economic growth in the post-crisis years has been remarkable. The emergence of the People's Republic of China (PRC), and the gradual opening of India, have provided the backbone of a solid performance, even during the slow growth years of the industrialized countries.

"As economic recovery has become more entrenched, concerns have shifted from achieving high growth to keeping the economies on a sustainable path," said Mr. Walter. In particular, he warned that vigilant policies in the PRC are essential to ward off excessive investment. In addition, Asia must still complete some other tasks, such as banking sector reform, the development of healthy local capital markets, and strong enforcement of the rule of law, including respect for intellectual property rights.

Mr. Walter cautioned that it would be a mistake to let complacency set in. "Asia must strengthen the role of markets to stay relevant in a more globalized environment and in the face of increasing competition," he said. Mr. Walter also recommended the implementation of pension reform and appropriate social security schemes to cope with an ageing society in many countries.

Asia Pacific Foundation of Canada Chief Economist Yuen Pau Woo noted that consumer spending would be the key to a soft landing in the PRC. He said that currency risk poses a dilemma for Asia's central banks and highlighted the "need for policy dialogue and coordination, especially among Asian economies."

David Roland-Holst of the University of California at Berkeley presented his forecasts for Asian expansion over the next two decades. He says that the economic emergence of the world's two most populous countries, the PRC and India, is transforming the economic landscape of East and South Asia and portends fundamental shifts in global economic relations. In recognizing the region's great sustainable growth potential, he emphasized the importance of Southeast Asia's emerging role as a growth bridge between the dynamic markets of the PRC and India.

"The greatest potential for trade expansion lies within Asia," said Mr. Roland-Holst. "However, a new generation of policies is needed to facilitate this. This involves infrastructure development, promotion of regional private investment, trade policy coherence, and poverty reduction."

ASEAN Secretary-General Ong Keng Yong agreed with Professor Roland-Holst and pointed out that in ASEAN "there is no doubt that the region's economic potentials have been … strengthened by our resolve to liberalize our trade regimes and deepen integration of our economies." Bloomberg News Asia-Pacific columnist William Pesek emphasized the importance of education and jobs of women for Asia's future, and that "it's not that Asia needs faster growth, it needs better growth." He also opined that "the energy equation alone means Japan, China, and India will remain natural rivals" going forward.

Contact Person

Douglas Brooks
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