Nusa Dua, Indonesia: Asian countries must boost domestic consumption and end their dependence on exports as external demand plunges amid the world economic slump, the Asian Development Bank chief said Sunday.
The call was echoed by regional finance ministers gathered at the ADB’s annual meeting on the Indonesian resort island of Bali, where strategies for overcoming the financial crisis took centre stage.
“Asia’s main export markets have experienced a massive contraction in demand. This has had severe impacts on Asia’s supply chains and has reduced intra-regional trade,” ADB President Haruhiko Kuroda told a seminar.
He said the flow-on effect had seen interest rates on bonds spike higher and currencies depreciate with the flight of foreign capital out of emerging markets.
Asian governments have responded by slashing benchmark lending rates and spending billions of dollars to stimulate their economies.
Kuroda said while these measures were vital, far more fundamental restructuring needed to be done to end the region’s addiction to external demand from rich countries.
“This grave situation needs more vigorous and concerted efforts by all concerned to bring growth in the region back to its higher trajectory and support the global recovery,” he said.
Flanked at the seminar by the finance ministers of Japan, Indonesia and Bangladesh, as well as senior finance officials from China and India, Kuroda said domestic demand would be a key driver of Asia’s recovery.
“Over the longer term, developing Asia is starting the process of rebalancing growth from excessive dependence on external demand to greater resilience on both consumption and investment,” he said.
“Already there are signs that domestic consumption is remaining strong in Asia and may well lead the way out of this downturn.”
The ADB is predicting economic growth of 3.4% for the region this year, compared with more than 9% in 2007.
In a report released here Saturday, the bank highlighted plans to increase its overall lending assistance by more than $10 billion in 2009-2010, including three billion to support more fiscal stimulus spending.
That would bring total ADB assistance during the year to about $32 billion , compared with about $22 billion in 2007-2008, it said.