Regional Economic Outlook and Issues |

Regional Economic Outlook and Issues

On 16 November 2011, the Lee Kuan Yew School of Public Policy hosted a Public Dialogue entitled “Regional Economic Outlook and Issues” by Mr Mahmood Pradhan, Senior Adviser at the International Monetary Fund, and Dr Ravi Balakrishnan, Resident Representative of the IMF in Singapore. The speakers gave their assessment of the economic situation in Asia in the aftermath of the global financial crisis and discussed measures that could help promote inclusive growth in the region. 

“The financial crisis is delayed but not derailed,” said Pradhan, pointing to the EU’s ability to manage the debt crisis adequately so far. However, Prahdan said world economic growth could slow down given stalled consumer demand in the US and high exposure of heavily leveraged European banks to risks. 

With regard to the emerging Asian economies, their GDP growth has shrunk by 0.2 per cent after the crisis, and will possibly contract by 0.3 per cent in 2012, noted Pradhan. “The financial crisis hit exporting countries of the region hardest, reaching the peak in 2009,” he noted, adding that their recoveries normalised chiefly due to government stimulus programmes aimed at increasing domestic consumption and the improved performance of Western economies.

The post-crisis situation in China has been developing in a rather interesting direction, observed Pradhan. “If exports constituted a major share of China’s growth prior to 2009, this could no longer be the case after the crisis,” he said. He expects that future growth will come mainly from private investment, domestic consumption and public domestic demand. But there is also a threat to China’s robust growth from the overheating property bubble in cities such as Shanghai and Beijing that requires appropriate policies, he noted.

On the ASEAN region, Pradhan said that growth remained healthy, with countries performing relatively well through the promotion of private investment and domestic consumption due to the availability of cheap credit, which has overheated certain economies. This has entailed tightening credit regulation in countries such as China, South Korea, Thailand, he said.

“Asian banks are better capitalised compared to European banks and have ample room to respond if another global crisis occurs,” said Pradhan. Among other anti-crisis policies, he said Asian countries can draw on their abundant foreign exchange reserves or regional reserve pooling arrangements and ease monetary policy.

Addressing the issue of income inequality in Asia, Balakrishnan said that though economic growth has helped to reduce substantially the number of people living on less than $1 a day, “Asia is still home to the world’s largest number of poor”. He further noted the negative impact of the financial crisis on poverty reduction efforts of Asian governments and underlined the importance of implementing “inclusive growth” policies.

“Fiscal policy can play an important role by reorienting expenditures to social priorities such as education and health,” said Balakrishnan. He said labour market institutions have a role to play and emphasised the need for a minimum wage to improve workers’ welfare. He also highlighted the necessity of promoting “financial development projects” aimed at providing easy access to capital, specialised finance for rural areas, and tools such as microfinancing. Lastly, he argued that these policies cannot be achieved without institutional reforms, which lie at the heart of good governance.

Both speakers agreed that the emerging Asian economies have dealt with the financial crisis effectively and possess the necessary resources and experience to respond to future setbacks in the global economy. One of the remaining challenges ahead lies in narrowing the gap between the various segments in society, they said.

 

By Uran Bolush, a first-year Master of Public Policy student at the LKY School.

 
Synopsis:

The recovery in advances economies is more sluggish than previously anticipated and the global outlook has become increasingly uncertain. The handover from public stimulus to private demand has stalled in the United States, and euro area financial turbulence has intensified. While the outlook for advanced economies is for a continuing, although weak, expansion over the remainder of 2011 and 2012, the risk of a renewed slowdown is greater now than six months ago, especially if structural fragilities remain unresolved. This has sizable implications for the outlook for Asia and creates severe near-term challenges for Asian policymakers. Thinking more long term, inequality has risen by more in many Asia countries than in other emerging markets. Consequently, making growth more inclusive has been pushed to the forefront of the policy agenda. IMF economists Mahmood Pradhan (Deputy Director of the Asia Pacific Department) and Ravi Balakrishnan (Resident Representative in Singapore) will discuss the IMP's lateset thinking on these topics, as set out in the October 2011 Asia and Pacific Regional Economic Outlook.

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Speaker(s):

Mahmood Pradhan, Senior Advisor, International Monetary Fund; Ravi Balakrishnan, Resident Representative in Singapore, International Monetary Fund

Date:
Wednesday, 16 November 2011
Time:
12.15 p.m. - 1.30 p.m.
Venue:

Seminar Room 3-4
Level 3, Manasseh Meyer
Lee Kuan Yew School of Public Policy
469C Bukit Timah Road
Singapore 259772

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