Asia’s Economy to Grow by 50% in Five Years

IMF Blog, June 15, 2010

Source details

Publication date: June 15, 2010.
Central projection: "Based on expected trends, within five years Asia’s economy will be about 50 percent larger than it is today and be comparable in size to the economies of the United States and Europe." (Anoop Singh, Director of the IMF’s Asia and Pacific Department)
Context: Summary and highlights drawn from the IMF’s Finance & Development magazine issue addressing Asia’s rising role in the world economy and related global financial-policy topics.

Projection:
- Within five years Asia’s economy will be about 50 percent larger than it is today and be comparable in size to the economies of the United States and Europe.
Implications discussed:
- Asia moving into a leadership role in the world economy.
- Need for Asian economies to rebalance growth sources (less reliance on exports, more domestic demand and services).

Key point:
- "China can emerge from the crisis stronger if it increases domestic demand and promotes global integration." (Linda Yueh)
Observations:
- China has relied heavily on exports to grow.
- To continue to thrive, China needs to increase domestic demand and promote global integration.

Key point:
- India is highlighted as the region’s second-biggest economy and a model for services-led development.
Observation:
- "India, which has a highly developed services sector," may offer cues for other export-dependent Asian economies.

Financial sector and capital:
- "Financial sector reforms can help reduce the cost of capital, spur investment, and promote rebalancing in Asia." (Sanjay Kalra)
Services promotion:
- "Promoting the services sector in Asia is another way to restore balance and boost growth." (Olaf Unteroberdoerster)
Central banking and monetary policy:
- Debate over monetary policy management is heating up; "the once-sharp difference between advanced and emerging economies is blurring." (Eswar Prasad)
- "Central banks must distill lessons from the global crisis and make concrete reforms." (Duvvuri Subbarao)
Principles for reform:
- "In designing new policies for the financial sector, old-fashioned ideas are important." (William Poole)

Debt dynamics:
- Many countries have slashed public debt ratios in the past often thanks to favorable macroeconomic conditions; they "may be less lucky in the future." (Harald Finger and Azim Sadikov)
Sovereign wealth funds:
- "Sovereign wealth funds are well-placed to navigate the new global economy that will emerge following the world wide recession." (Mohamed A. El-Erian)
- As the global financial crisis recedes, state-owned investment companies are "well placed to seize a new set of opportunities and navigate changing risks."
Energy subsidies:
- "Eliminating domestic energy subsidies is tricky, but oil-exporting countries that do so will see a clear payoff." (Dominique Guillaume and Roman Zytek)
- "Picture This" focuses on the high, and growing, cost of energy subsidies.

Municipal finance risks:
- Local governments in Europe and the United States faced financial distress after engaging in derivatives transactions. (Randall Dodd)
Political economy of commodity windfalls:
- "Democracies use windfalls from international commodity price booms to reduce external debt. Autocracies tend to spend them." (Rabah Arezki and Markus Brückner)

Profiles and interviews:
- Min Zhu discusses "Asia in the new world order, global economic issues, and the IMF’s relations with the region."
- "People in Economics: The Unlikely Revolutionary" profiles Jang Hasung, a Korean crusader for better corporate governance. (Hyun-Sung Khang)

Source: IMF Finance & Development magazine issue summarized on the IMF web page "Asia’s Economy to Grow by 50% in Five Years", June 15, 2010.