Korea: Keeping It Dynamic


MD's Updated HeadshotBy Christine Lagarde

(Versions in 한국의 and 中文)

My arrival in Seoul was somewhat delayed when dense fog caused my plane from Phnom Penh to be temporarily diverted from Seoul to Daegu. Still, better late than never! I was delighted to be back in Seoul, capital of one of the world’s most dynamic and innovative economies. Just remember: in a remarkably short period of time, Korea has risen from close to the bottom to close to the top—becoming the thirteenth most prosperous economy with an income per capita that is higher than the European Union average.

With such a track record, Korea plays an increasingly important role on the global stage. It held the annual presidency of the Group of Twenty advanced and emerging economies at the height of the global financial crisis in 2010. It is host to the Green Climate Fund, whose aim is to help developing countries respond to climate change—surely one of the greatest challenges of the 21st century. And it is playing ever increasing leadership roles in other international institutions, including the IMF.

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Back to Asia


Christine LagardeBy 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 by 2050. Back to Asia really means back to the future.

This time, I will visit three countries—Cambodia, Korea, and Myanmar. These countries represent three different chapters of the great Asian story, each in their own unique way.

Korea is a country that has propelled itself from very low income levels to one of the world’s richest economies in an astoundingly short period of time. It has a well-deserved reputation for innovation, technological brilliance and hard work. I am convinced it can stay at the leading edge, especially by making labor markets more inclusive—including for women—and making the services sector more dynamic and productive.

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


ASinghBy 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 living standards in advanced economies—come to an end?

In fact, while the economic performance of emerging economies in Asia remains undoubtedly strong in international comparison, it has already shown signs of gradual weakening.

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The Ties That Bond Us: What Demand For Government Debt Can Tell Us About the Risks Ahead


by Serkan Arslanalp and Takahiro Tsuda

It’s not news that emerging markets can be vulnerable to bouts of market volatility. Investors often pull sudden stops—they stop buying or start selling off their holdings of government bonds.

But what has become apparent in recent years is that advanced economy government bond markets can also experience investor outflows, and associated runs. At the same time, some traditional and new safe haven countries have seen their borrowing costs drop to historic lows as they experience rising inflows from foreign investors.

Our new research shows that advanced economies’ exposure to refinancing risk and changes in government borrowing costs depend mainly on who is holding the bonds— the demand side for government debt.

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Imagining If Key Foreign Banks Start Reducing Their Exposure in Asia


By Anoop Singh

European banks play an important role in supplying credit to several Asian economies. What happens if they start reducing their exposure to the region?

The largest borrowers from European banks are Australia, Hong Kong SAR, Korea, Malaysia, New Zealand, Singapore, and Taiwan Province of China, while China, India, and the economies of South East Asia generally have smaller liabilities.

Among European banks, those from the United Kingdom have a particularly significant presence in Asia. For most regional economies, the nonbank private sector—businesses and households—is the main recipient of credit from foreign banks as a whole.

Prominent role

European banks play a prominent role in the areas of trade credit and specialized project financing. In several Asian economies, however, lending by local subsidiaries and branches is funded primarily by local deposits, reducing potential deleveraging pressures.

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The Puzzle of Asia’s Rapid Rebound


By Anoop Singh

Now here’s the puzzle: how is it that Asia has rebounded sooner and more strongly than the rest of the globe from the economic slump when the region is so heavily dependent on exports for its growth? This, and the future prospects for the region, are two of the key issues we analyzed in the latest Regional Economic Outlook (REO) for Asia and the Pacific, recently launched in Seoul and Tokyo.

There are three pieces to the puzzle of Asia’s rebound: 

  • Exports (in value added terms) account on average for about one-third of GDP in emerging Asian countries, while many of the region’s large firms depend on global capital markets to finance their investment projects.
  • Recovery in the rest of the world has been unsteady.
  • Yet Asia’s own GDP figures for the third quarter have been impressive: Korea grew nearly 3 percent in that quarter alone, Singapore grew even faster, and China’s growth accelerated to 9 percent year-on-year, propelled by booming investment. 
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