Speech

 

As prepared for delivery

A very good morning to all.

Governor Vitai, thank you for co-hosting this conference in the run-up to our Annual Meetings here in Bangkok later in the year.

Having just seen the amazing location for the meetings and knowing the hospitality of the Thai people, I am very excited about coming back in October with all the delegations of our 191 member countries.

At the outset of our proceedings, I also would like to express my gratitude to the government of South Korea for its financial support for this conference.

We gather at a time of global transformations in technology, demographics, trade, and geopolitics; a time of shocks and uncertainty.

This week, global economic resilience is tested yet again by the new conflict in the Middle East. As in all conflicts, I mourn the human suffering and loss of life.

Let me stress that the IMF, as guardian of international economic and financial stability, is watching the events unfold very carefully. We are assessing and quantifying the regional and global economic ramifications, and you will find this reflected in our World Economic Outlook to be published next month.

This conflict, if it proves to be more prolonged, has obvious potential to affect global energy prices, market sentiment, growth, and inflation, placing new demands on policymakers.

For most of Asia, what is at stake is energy security and, through that, confidence. Stock markets are already reacting.

But today let me not discuss this latest shock any further—it is still too soon. Let me simply note that it is emblematic of our new world. For some time now I have been warning our global membership that uncertainty is the new normal. We have not entered some neat global transition from State A to State B; we are in a potentially prolonged period of flux.

In this new world, policymakers and private sector players alike need to have not only robust strategies and financial strength but—importantly—agility. New shocks in different shapes and sizes will keep coming. Most of the time we cannot predict them, but all of the time we must strive to be ready for them.

For Asia, it means building on past successes, asking the right questions, preparing the answers, and then acting on them. No point lamenting forces outside your remit; much better to focus on what is under your own control.

Let me start with Asia’s past successes.

Few would dispute that the last quarter century has been Asia’s golden hour. A region that, back in the year 2000, was still shaking off the pain of a financial crisis and went on to build new policy frameworks; new systems of financial sector oversight; official reserves; and above all, trust.

The result? Progress on a vast scale. Financial stability. Low inflation. FDI, technology upgrades, and trade. Record-breaking, private sector-led growth. Jobs. Poverty reduction as never seen before, with China and India in particular lifting hundreds of millions of people out of subsistence—just see this figure.

Today, Asia generates two-thirds of global GDP growth and accounts for almost 40 percent of world trade—here two more charts.

No longer is it possible to talk about the future of the global economy without talking about Asia.

Looking back 25 years, Asia has every reason to be proud. And, looking forward 25 years to the year 2050—as this conference will do—we can agree that by and large Asia has created excellent initial conditions for continued success.

So let me now turn to the future, sharing some thoughts on the transformative challenges as they pertain to Asia and how best to address them.

I want to zoom in on three challenges: one, lifting productivity and competitiveness by harnessing AI; two, managing labor market pressures; and three, building resilience and preserving trade as an engine of growth through regional integration.

First challenge: productivity and competitiveness. Across the globe, AI is creating great opportunity. In Asia, we estimate AI could boost annual GDP growth by up to 0.8 percentage points, depending on its productivity impact and how it interacts with labor in the production process.

Harnessing the benefits calls for large-scale public and private investment to deliver the technology and, equally, to ensure economies are prepared to receive it—digital infrastructure, internet connectivity, skills enhancement, and more. This in turn requires good policies—to educate and train; to remove undue regulatory barriers; to let firms have a fresh start if appropriate; to deepen stock and bond markets in support of private risk-taking; and to put appropriate AI guardrails in place.

Asia is making an excellent start. Singapore is at the top of our index of AI preparedness. China and Korea lead the way in AI adoption and model design. India is paving a path to democratizing AI at home and abroad. Japan is a seasoned user of AI in robotics. Indonesia, Korea, Malaysia, and Thailand have new out-of-court debt restructuring mechanisms to help struggling firms get back on their feet. My advice: keep it up!

Second challenge: people. New IMF research shows that not everyone will benefit from AI: demand for high- and low-skilled jobs will increase, but many positions in the middle could take a beating. We are particularly concerned about the impact on entry-level jobs—those that often include routine, easy-to-automate tasks—and what it would mean for young people. Adaptable workforces will be key—Singapore’s efforts in this regard are at the heart of its AI preparedness. I like to say it’s about “learning to learn.”

Demographics will compound the challenge, with Asia set to age faster than any other region as we see here.

By 2050, the number of Asians aged 65 or more will have doubled. Yet conditions vary. In Japan, aging is well advanced. China, Korea, and some others are younger on average but aging rapidly. In contrast, India, Bangladesh, and several ASEAN member countries will still see rising young populations for some time. Policy responses need to differentiate accordingly: some must focus on labor force participation, others on job creation.

The forces of technology and aging will come together to put more people in service sector jobs, ranging from AI-enhanced professions to old-age care. Simultaneously, more tasks could be performed virtually. One question that arises is what this will mean for urbanization. In the last 25 years, Asia has seen vast migrations to its cities, delivering positive agglomeration effects. Will these effects continue, or will Asia in 2050 see a more dispersed workforce?

Third challenge: trade. The role of exports and imports as a growth engine for Asia dates back to the 1960s. Yes, it is true that in this multipolar world trade is now being hit by one policy shock after another. And yes, it is therefore also true that openness can be a vulnerability—please look here at the export-to-GDP ratios of a selection of Asian countries.

But we also know from thousands of years of experience that trade is like water: try to obstruct it, and it finds a way to flow around the barrier. We see this in the reconfiguration of global trade today.

In trade, I see an example of an area where Asia can take steps on its own to address the problem. How? By pressing forward with regional integration. IMF analysis suggests a push for closer trade links—focused on lowering nontariff barriers—could on average raise Asian GDP by 1.8 percent in the long run.

Of course, longstanding national rivalries mean integration is not easy, but note that Europe—a continent once marred by war—has done it, building a union that supports domestic demand and delivers strength on the global stage. Let Asia’s vision for integration be equally ambitious, aspiring to go beyond trade agreements to building an internal market like the EU’s across many countries. It is possible.

The shift to digital services could help advance this agenda. Asia leads the world in mobile broadband subscriptions, giving it a natural advantage in digital payments. Already, ASEAN has created one of the world’s most innovative and interconnected cross-border mobile payment networks. These are successes to build on.

Circling back to where I began, we at the IMF plan to spotlight Asia’s leading role in digital payment innovations by featuring safe and inclusive digital finance as a key theme at our upcoming Annual Meetings.

Let me wrap up. For the sake of Asia’s youth, I hope—I expect—that in 2050 we will see a vastly more interconnected region: energetic, dynamic, and prosperous. One where many more countries will have achieved advanced-economy status, overcoming the famous “middle-income trap.”

I wish you all a very successful two days of discussion on what Asia has achieved, the challenges it faces, and how to overcome them. May your deliberations generate an ambitious vision for Asia in 2050 and a set of concrete policy priorities to get there.

Asia: you have performed incredible feats in the last 25 years—please, focus on what is within your power to do, and achieve the same and much more in the next quarter century! The future is yours to take!

Thank you!