Back to Asia


By Christine Lagarde In a couple of days, I will embark upon a trip to Asia. Every time I visit Asia, I can feel that dynamism and intensity are in the air. It feels like moving forward in time. Hardly surprising as under current trends, developing Asia alone will account for half of global GDP […]

Inclusive and Sustained Growth in Asia: The Role of Fiscal Policy


By Anoop Singh (Versions in 中文 and 日本語) Fiscal management has improved in Asia over the past decade. It has become more responsive to economic conditions and thereby helped stabilize growth, especially during the global financial crisis. While these are important achievements, major challenges still lie ahead—as our latest Asia and Pacific Regional Economic Outlook points out. What are these […]

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


By Anoop Singh (Versions in 中文 and 日本語) 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. Perhaps because the region has been doing rather well, policymakers’ concerns have increasingly shifted towards medium-term risks: could growth and fast convergence to […]

Imagining If Key Foreign Banks Start Reducing Their Exposure in Asia


Going forward, while the space for a macroeconomic policy response is smaller than it was entering the global financial crisis, Asia’s policymakers still have ample room to react appropriately to a sharp deleveraging of foreign banks arising from a euro area shock. In addition, capital adequacy ratios, which exceed regulatory norms in most economies, and low nonperforming loan ratios, combined with room to offer liquidity support, suggest that relatively healthy local banking systems should also provide a buffer, as they did in the wake of the global financial crisis.

What to Do About Unemployment in the Caucasus and Central Asia


Looking beyond growth rates, one challenge that stands out for the Caucasus and Central Asia region as a whole is to create jobs.

The Other Rebalancing: Asia’s Quest for Inclusive Growth


For the past two or three decades, rising inequality—inequality of incomes, of economic outcomes and of economic opportunities—has taken a back seat to the goal of boosting overall growth. But growing discontent with the fallout of the global financial crisis has put inequality back on top of the policy agenda. While the symptoms may be different, tackling inequality is no less an issue in Asia. Indeed, research shows that inequality can be counterproductive to sustaining longer-term growth. So, in increasingly turbulent global economic times, this gives added importance to promoting shared—or inclusive—growth in Asia that is more likely to be sustained.

This has been a major focus our latest Regional Economic Outlook, which we presented in Manila today. A great challenge for the government here, and for other countries across the region, is to raise living standards for a wide section of their populations.

Dealing with Uncertain Economic Times: The Outlook for Asia


Recent large equity sell-offs across Asia and safe haven flows into Japan illustrate perfectly the region’s vulnerabilities to further global shocks. While the region’s fundamentals—built up over the past decade—remain relatively strong, economic uncertainties in Europe and the United States pose large downside risks.

The world economy has entered a dangerous new phase and, as the IMF’s Managing Director stated recently, “what makes the situation all the more urgent is that it has implications for every country.”

Our Regional Economic Outlook for Asia and the Pacific emphasizes these risks, and stresses the need for policymakers to remain vigilant and nimble in this extraordinarily uncertain climate. The view from here in Tokyo—looking out at the region—may be more serene than the view from other advanced country capitals, but there are storm clouds on the horizon.

Capital Flows to Asia Revisited: Monetary Policy Options


Capital flows emerging Asia should be high on the ‘watch list’ for policymakers in the region. But, perhaps, not in the way we had previously anticipated. Twelve months ago we were keenly attuned to the risks posed by the foreign capital that flooded into Asia from mid-2009 onwards. Now, what we’re seeing is not really all that “exceptional.”

With the recent surge, net overall capital flows to emerging have not surpassed the peaks reached in past episodes of large inflows to the region. Of course, that’s not to say it’s all blue skies. The nature of inflows is different this time—dominated by portfolio flows—and that poses new challenges and risks for policymakers.

Keeping Asia from Overheating


Asia’s vigorous pace of growth has seen the region play a leading role in the global recovery. But there are signs that higher commodity prices are spilling over to a more generalized increase in inflation. Expectations of future inflation have picked up. And accommodative macroeconomic policy stances, coupled with limited slack in some economies, have added to inflation pressures.

Against this backdrop, the need for policy tightening in Asia has become more pressing than it was six months ago, especially in economies that face generalized inflation pressures. How should policymakers address these challenges?

Asia’s Supply Chain and Global Rebalancing


Much of the debate over global rebalancing has focused on the U.S.-China trade imbalance. But that’s missing the bigger picture. With the growth of cross-border supply chains—a signature feature of Asia’s trade in recent decades—it would be misleading to focus on bilateral imbalances and exchange rates.

Instead of specializing in producing certain types of final goods, Asian exporters increasingly have specialized in certain stages of production and become vertically integrated with each other. So, as Asia’s economies strive to rebalance their growth models, we need to understand better how the regional supply chain affects the way exchange rates and shifts in global demand work.

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