Quick Action, Rebalancing, To Lead Asia Out of Crisis, Says ADB President

BALI, INDONESIA - Decisive action, coupled with a greater reliance on domestic demand, will lead Asia out of the current downturn, ADB President Haruhiko Kuroda told a seminar audience at ADB's 42nd Annual Meeting in Bali.

The Governors' Seminar on "The Global Financial Turmoil and Implications for Asia" discussed how developing Asia's economies have been affected by the crisis and how they can contribute to a return to global financial stability and economic growth.

In his introductory remarks to the seminar, Mr. Kuroda noted that Asian governments have responded quickly to the crisis with appropriate financial, monetary and fiscal policies and so far the impact on financial stability has been limited. However, he warned that the "longer or deeper" the crisis becomes the greater the risk to the region's financial sector.

"This grave situation needs more vigorous and concerted efforts by all concerned to bring growth in the region back to its higher trajectory and support the global recovery," he said.

A recent ADB report forecast that developing Asia's economies will experience a sharp slowdown in growth as the full impact of the severe recession in industrialized economies is transmitted to emerging markets. The report, Asian Development Outlook 2009, released 31 March, forecasts that economic growth in developing Asia will slide to just 3.4% in 2009, down from 6.3% last year and a record 9.5% in 2007. If the global economy experiences a mild recovery next year, the outlook for the region will improve to 6% in 2010.

Sri Mulyani Indrawati, Minister of Finance and ADB Governor for Indonesia, warned that a continued reversal in capital inflows could exert significant macroeconomic pressure on the region. Foreign capital took flight immediately following the onset of financial turmoil last September. Asia's stock market indexes fell even more sharply than advanced markets and currencies tumbled, placing significant pressure on country’s balance of payments. Sri Mulyani said these pressures are one of the region’s “biggest challenges.”

Mr. Kuroda said that the pronounced impact of the current global downturn on the region’s growth underlined the risk of excessive dependence on external demand. He said developing Asia should rebalance its growth to get through the global crisis and boost its resilience to large external shocks in the long run.

"Developing Asia is starting the process of rebalancing growth from excessive dependence on external demand to greater reliance on both domestic consumption and investment," he said. "Already there are signs that domestic consumption is remaining strong and Asia may well lead the way out of this downturn."

The Governors' Seminar also featured presentations by Kaoru Yosano, Minister of Finance and ADB Governor for Japan; Li Yong, Vice Minister of Finance and ADB Alternate Governor for the PRC; Nick Sherry, Minister for Superannuation and Corporate Law and Temporary ADB Alternate Governor for Australia; Abul Maal Muhith, Minister of Finance and ADB Governor for Bangladesh; and Ashok Chawla, Secretary, Department of Economic Affairs, Ministry of Finance and ADB Alternate Governor for India. The event was moderated by journalist Nick Gowing of the BBC.

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