Asia Pacific - from ‘price takers’ to ‘price makers’
Shirajiv SIRIMANE
Growth dynamics in the Asia-Pacific region have been impressive in
the recent past and economic recovery has been strong mainly supported
by export-led growth. Exports have benefited from the global investment
cycle as well as strong demand from emerging economies in both Asia and
other regions said Central Bank Governor Ajith Nivard Cabraal.
Delivering the key note address at the G20 Cannes Summit -
Perspectives from Asia-Pacific, at the United Nations Conference Centre,
Bangkok yesterday he said that near-term prospects are favourable, with
growth in the Asia and Pacific region projected to average nearly 7
percent in both 2011 and 2012.
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Central
Bank Governor Ajith Nivard Cabraal |
“China and India are presumed to expand by 9 1/2 percent and 8
percent, respectively, in the next two years. Such growth will have
important spillovers for other countries in the region (and the world),
particularly through demand for commodities,” he said.
“A remarkable transformation in the Asia and Pacific economies has
taken place over the past few decades and the region has become the
engine of world growth. There is a transformation from mere “suppliers
of raw materials” to “major manufacturing economies” and “knowledge
based economies,” he said.
“In addition within a relatively short period of time, some Asia and
Pacific countries have changed from “price takers” to “price makers.”
“Rapid developments in many markets: money, assets, bonds, equities,
and foreign exchange have added a new dimension to the risks and
challenges facing the economic world,” he said. “Asian financial markets
are now being “noticed” as the developments in the Asian financial
markets have been rapid and since the early 1990s, many emerging Asian
economies have integrated into the international financial system.
“World economic recovery is getting increasingly diverse. As such,
national policy requirements demand divergent actions.
In the meantime, global demand re-balancing, financial market
reforms, and commodity markets demand for a concerted effort through a
stronger, collaborative policy response. In such a context, policymakers
may need to resort to unconventional policies, which will bring about
healthy economic growth comparable to pre-crisis level.
“However, a key challenge would remain: the growth has to be
inclusive, where all members of the society contributes and benefits
from it.
“The debt crises in the Eurozone and the US have created a dearth of
investment opportunities for the reserve-rich Asia. “However, directing
the funds within the region would make future growth prospects more
sustainable,” he added. Maintaining stable macro-economic fundamentals
is imperative and stable high growth requires stability in prices,
exchange rates, interest rates, sustainable levels of debt, unemployment
and poverty. The ability for Governments and Central Banks to move
quickly and decisively needs to be enhanced. Two adverse developments
have stirred the global economic recovery momentum and the Governor
attributed them to slow recovery in the many advanced economies and a
large increase in the fiscal and financial uncertainty.
“The combination and interaction of these two developments may
heighten their impact further,” he said. The Governor warned that small
regional economies could face difficult times due to competition from
fast growing emerging economies, higher commodity prices, volatile
capital inflows and currency values which pose significant threats to
maintaining financial system stability.
Speaking to the Daily News Business from Bangkok he said that Sri
Lanka is getting the fundamentals right of its people and are looking at
even better times in the future.
He said the country is slowly and surely heading towards becoming a
US $ 4,000 per capita income country by 2015.
“When we reach that our economy would be a 100 billion dollar economy
which would be a large robust economy and it would be an exciting time
for Sri Lanka,” the Governor said.
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