## Emerging Asia: At Risk of the “Middle-Income Trap”?

_IMF Blog, April 29, 2013_

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**Canonical URL:** [Emerging Asia: At Risk of the “Middle-Income Trap”?](https://www.imf.org/en/blogs/articles/2013/04/29/emerging-asia-at-risk-of-the-middle-income-trap)

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## Bibliographic details
- Authors: Anoop Singh
- Published: April 29, 2013

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### Regional growth trends and recent performance
- Emerging economies in Asia have weathered the global financial crisis relatively unscathed and appear to be on track for continued strong growth this year and the next.
- Signs of gradual weakening have appeared despite strong international performance.
- China: growth has slowed from a rate of over 10 percent in the 2000s to between 8 and 9 percent in the past two years.
- India: growth has slowed from around 8 to 6 percent during the same period.
- ASEAN-4 (Indonesia, Malaysia, Philippines, Thailand): no trend slowdown observed, but growth was lower to start with and—with the notable exception of the Philippines—remains significantly below pre-Asian crisis rates.

### Risk of the middle-income trap and historical context
- Empirical evidence: over the past half century, the frequency of abrupt slowdowns lasting for at least a decade has been 1.5 times higher for middle-income countries than for low- or high-income counterparts.
- Counterexamples within Asia: Korea, Singapore, and Taiwan Province of China graduated from middle income to high-income status in just a few decades, showing the trap can be avoided.

### Factors that reduce the risk of sustained slowdown
- Research highlights the following as especially helpful in minimizing risks:
  - Good infrastructure.
  - Sound economic institutions.
  - Open and diversified international trade.
  - Sound macroeconomic and macro-prudential policies that alleviate booms and busts.
- Many middle-income Asian economies compare favorably on several of these dimensions relative to counterparts in other regions, but weaknesses remain.

### Country-specific vulnerabilities
- India, the Philippines, and Thailand: exposed to larger risk of growth slowdown stemming from subpar infrastructure.
- India and the Philippines (also China and Indonesia): need improvement in economic institutions.
- China: relative risk factors relate to its post-crisis increase in investment.
- Malaysia: strong capital inflows have clearly supported growth but also involve potential vulnerabilities.

### Demography and labor-force implications
- Demographic trends are widely heterogeneous across the region.
- China, Thailand, and Vietnam: will experience a rise in the so-called dependency ratio—the size of the young and old population relative to those of working age—over the next decade.
- India and the Philippines: will see a decline in the dependency ratio over the next decade.
- Ageing will increase the importance of reforms that mobilize untapped pools of labor, notably women, many of whom remain under-employed or out of the labor force across the region.

### Policy implication (summary)
- Emerging Asia is doing well, but only through unremitting reforms—improving infrastructure, strengthening institutions, maintaining open trade, applying sound macroeconomic and macro-prudential policies, and mobilizing labor—will the region be able to fulfill its promise.

*Source: Emerging Asia: At Risk of the “Middle-Income Trap”? (Anoop Singh, April 29, 2013).*

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## References

- [economic performance of emerging economies in Asia](http://www.imf.org/external/pubs/ft/reo/2013/APD/eng/areo0413.htm)

_Source: https://www.imf.org/en/blogs/articles/2013/04/29/emerging-asia-at-risk-of-the-middle-income-trap_