The external recovery has been tentative this year after G3 economic growth slipped during the first half—the better US growth outlook has yet to benefit Asia. There is some uncertainty over Japan’s prospects, and the eurozone economy continues to struggle.
Developing Asia’s resilient growth is partly due to stronger domestic and regional demand, although it varies across subregions—rising GDP growth in South Asia is offset by a slowdown in Southeast Asia and Central Asia, while East Asia’s growth is flat.
There are five downside risks to the outlook:
- delays in planned reforms in the region;
- the impact on developing Asia of a faster slowdown in People’s Republic of China (PRC);
- increasing corporate sector external debt;
- weaker recovery in advanced economies; and
- capital outflows or financial volatility from early US monetary tightening
These risks underscore the reasons why Asia’s policymakers must continue structural reform, while keeping macroeconomic fundamentals strong.
Despite tepid global growth, Asia’s regional integration continues to deepen, with cross-border trade and investment flows, holdings of Asian financial assets, and migration and tourism stable or growing. Regional cooperation between governments also continues to strengthen.
Asia and Europe: A comparative analysis
This issue of the Asian Economic Integration Monitor includes Special Chapter: Regional Financial Integration and Crisis in Asia and Europe—A Comparative Analysis. The future path of integration in Asia will likely be different than in Europe. Asia will continue to strengthen efforts to harmonize rules and regulations especially in the financial sector, and to further unilateral trade and investment liberalization supported by infrastructure connectivity. Regional arrangements and initiatives such as the ASEAN Economic Community and free trade agreements will lend further push to such liberalization.
Managing the region’s diversity remains an important goal, and strengthening national economies by cooperating with other economies is always Asia’s approach of integration.
About the Asian Economic Integration Monitor
The Asian Economic Integration Monitor is a semiannual review of Asia’s regional economic cooperation and integration. It covers the 48 regional members of the Asian Development Bank.
- Executive Summary
- Regional Economic Update
- External Economic Environment and Regional Outlook
- Risks to the Outlook and Policy Issues
- Progress in Regional Cooperation and Integration
- Update on Trade Integration
- Cooperation on Trade Policy: Asia’s FTAs
- Update on Financial Integration
- Developments on Infrastructure Connectivity
- Update on Labor Mobility
- Macroeconomic Interdependence between Pacific Developing Member Countries and Asia
- Special Chapter: Regional Financial Integration and Crisis in Asia and Europe - A Comparative Analysis
- Drivers of Economic Integration
- Financial Integration and Financial Development
- Crisis Lessons
- The Case for Macroprudential Policy