The Association of Southeast Asian Nations (ASEAN) has made progress through convergence, and it should continue to strengthen measures promoting this thrust, according to an executive from the International Monetary Fund (IMF).
David Lipton, IMF first deputy managing director, said ASEAN has set an example for aspiring developing countries by successfully rising from poverty to prosperity due to steady macroeconomic management, economic reform, and liberalization, along with investment and innovation.
Now, the region, which will formalize its decades-long move toward social, political, and economic integration with the launch of the ASEAN Economic Community by the end of the year, is pursuing the next stage—convergence in living standards to those of the advanced economies, said Lipton in a recent report by Bernama, Malaysia’s national news agency.
Lipton, who spoke during a recent visit to Malaysia, the chair of the ASEAN for this year, said export-led growth and industrialization have helped to drive regional convergence, as has the more recent spike in domestic demand.
IT innovations, too, have been bringing change to manufacturing, infrastructure and services, he added.
He noted that the resilience of member economies reflects the dynamism of the region’s urban middle classes, which are driving consumption and investment.
Lipton continued that at the regional level, progress has been made in creating a financial safety net, including the renewal of bilateral swap arrangements, doubling of the resources of the Chiang Mai Initiative Multilateralization, and strengthening of the ASEAN+3 Macroeconomic Research Office.
Lipton said closing infrastructure gaps is another key to convergence.
“Our World Economic Outlook examined this issue last year and found that infrastructure investment can raise potential output and be self-financing when there is substantial lack in the economy,” he added.
ASEAN also remains a magnet for foreign direct investment and portfolio flows, hitting a record high of US$125 billion in 2013, comprising 9% of the global total.
But he said there are challenges to convergence, and pointed out that while ASEAN economies have grown 6.5% annually since the 2008 crisis, growth is now somewhat slowing.
He warned that the IMF could not rule out the risks from volatile capital flows related to geopolitical tensions, uncertainty about oil prices, and changes in the interest rate policies in advanced economies.
Lipton said global growth has been weaker since 2008, adding that the IMF has had to revise downward the global growth forecast to 3.5% for this year and 3.7% in 2016.
“One key factor, on the minds of many here in Asia, is the slower growth of emerging market countries. China’s deceleration has already had an impact on global demand and growth is expected to moderate again this year,” Lipton said.
Photo: Longyi
