Asia’s Advancing Role in the Global Economy

IMF News, March 12, 2016

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Bibliographic details

• Authors: Christine Lagarde
• Published: March 12, 2016

Overview

• Speech by Christine Lagarde, Managing Director, International Monetary Fund, New Delhi, India, March 12, 2016. As Prepared For Delivery.
• Asia is described as the world’s most dynamic region, accounting for 40 percent of the global economy.
• Over the next four years—even with slightly declining momentum—it stands to deliver nearly two-thirds of global growth.

Building on Recent Gains

• Long-run performance:
  • For the past 25 years—the Asian crisis notwithstanding—the region’s economy has grown by around 6 percent a year.
  • In the aftermath of the recent global financial crisis, Asia was a rare bright spot.
• Social and human development:
  • Over the past 35 years, this region has been the world’s leader in reducing poverty.
  • Education and health outcomes have improved significantly; living standards have been raised.
• Innovation and integration:
  • Asia has become a byword for innovation across technology sectors (examples cited: cars, smartphones, televisions, biotechnology, commercial satellites, renewable energy).
  • Increased interconnectedness means Asia affects and is affected by global economic developments more than ever before.

Global Economic Challenges and Asia’s Response

• Global challenges listed:
  • Volatile markets and capital flows;
  • Economic transitions and financial tightening in many countries;
  • The large drop in commodity prices, including oil;
  • Escalated geopolitical tensions.
• Broad policy responses:
  • Supportive monetary policy—consistent with price and external stability objectives;
  • Growth-friendly fiscal measures;
  • Macro-prudential measures to safeguard financial stability.
• Country-specific structural reform priorities (examples):
  • China: improving the allocation of credit to help rebalance the economy away from debt-led investment.
  • Japan: tackling dual labor markets, liberalizing product markets, and reforming corporate governance.
  • India: enhancing the efficiency of product markets, encouraging private investment, and improving infrastructure.
  • Across many countries: strengthening the business environment and developing bond markets.
• Purpose: Structural reforms are key to boosting competitiveness, growth, and jobs and to securing medium- and long-term prospects.

Unlocking Asia’s Potential

• Inequality and inclusion:
  • Across the region as a whole, income inequality has worsened since 1990.
  • A new IMF staff paper finds that income inequality has since increased in 15 of 22 Asian economies.
  • Asia remains home to two-thirds of the world’s poor, many of whom live in India.
  • In most of the region, women and youth are still greatly underrepresented in the labor market.
  • Regional population: Asia’s 4.4 billion people.
• Opportunities and policy levers:
  • Broadening access to services like health and finance:
  • India is targeting universal access to banking services by 2018.
  • Through the Pradhan Mantri Jan-Dhan Yojana scheme, over 210 million previously unbanked people have opened a bank account since August 2014, with social transfers paid directly.
  • Leveraging fiscal policy:
  • Target social spending on the neediest; avoid costly across-the-board subsidies; make taxes more progressive.
  • India’s Aadhaar system: almost 1 billion people have Aadhaar numbers, with potential to deliver payments and other services—including for women.
  • Example: Philippines pioneered conditional cash transfer programs.
  • Empowering women:
  • Enhance girls’ access to high quality education; dismantle legal and logistical barriers to economic participation; make it more practical for women to combine a job and a family.
  • Example: Beti-Bachao, Beti-Padhao initiative to improve women’s welfare services.
  • Labor market formalization:
  • Tackling duality and informality to bring more young people into formal jobs—important for countries with aging populations.
  • Infrastructure and services:
  • More than 800 million people in Asia lack access to water, sanitation and electricity—inclusive growth requires more and more efficient infrastructure investment.
  • Trade integration:
  • Even-greater trade integration can support sustained growth, especially for India and other South Asian countries.
  • Multilateral trade liberalization can be globally welfare-enhancing; in its absence, comprehensive regional trade agreements can lower tariff and non-tariff barriers and incorporate new areas like services.
  • Climate change:
  • Last December, 186 countries submitted mitigation pledges in the context of the historic Paris Agreement.
  • Implementation requires actions such as carbon pricing and energy subsidy reforms; Asia has a massive stake in this effort.

Asia and the IMF

• Institutional and governance developments:
  • Quota and governance reforms came into effect earlier this year that enhance the representation of emerging Asian economies within our 188 member countries.
  • One consequence is that India now joins China and Japan among the Fund’s top ten shareholders.
  • The renminbi was included as the second Asian currency in the IMF’s SDR currency basket—joining the yen.
• Engagement and capacity development:
  • In 2018, Indonesia will host the IMF Annual Meetings.
  • The Fund is opening a new Regional Training and Technical Assistance Center for South Asia in New Delhi—its first fully integrated center and a model for future capacity development work.
  • Partner countries in the center: India, Bangladesh, Bhutan, Maldives, Nepal, and Sri Lanka; external partners include Australia and Republic of Korea.
  • The Government of India offered to host the center and made a substantial financial commitment.

Conclusion: Asia’s Global Leadership

• Asia’s dynamism presents a historic opportunity to invest now in the future—and to advance Asia.
• Doing so will put Asia on the path to sustained growth and strengthen its role in the global economy—as a key contributor and as a leader for the 21st Century.

Source: "Asia’s Advancing Role in the Global Economy," By Christine Lagarde, Managing Director, International Monetary Fund, March 12, 2016.

Content in this bundle

• 031216cpdf (PDF)
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References

• India and the IMF
• Speeches
• Christine Lagarde
• Conference: Advancing Asia
• PRESS CENTER
• Asia and Pacific: Stabilizing and Outperforming Other Regions
• [IMF Working Paper: Asia’s Quest for Inclusive Growth Revisited

3IMF Working Paper: Sharing the Growth Dividend: Analysis of Inequality in Asia 4IMF Working Paper: Asia’s Quest for Inclusive Growth Revisited 5 “Prime Minister’s Community Wealth-Building Scheme” 6 “Save girl child and educate her”](https://www.imf.org/external/pubs/cat/longres.aspx?sk=42742.0)

• [Sharing the Growth Dividend: Analysis of Inequality in Asia

4IMF Working Paper: Asia’s Quest for Inclusive Growth Revisited 5 “Prime Minister’s Community Wealth-Building Scheme” 6 “Save girl child and educate her”](https://www.imf.org/external/pubs/cat/longres.aspx?sk=43767.0)

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