Asia will see 'more risks tied to bigger economy'

However, Asia needs measures to deal with growth-associated risks such as capital inflows, which could create bubbles, or widen income inequality.

Banthoon Lamsam, president and CEO of Kasikornbank, said the market economy had resulted in continued prosperity in the Western hemisphere, but reckless growth created bubbles and gave way to the rise of Asia. 

He was speaking at an international symposium on “Next Decade: Asia” hosted by KBank.

The Eastern hemisphere, with 60 per cent of the world’s population and one-third of its economy, was now shoring up the global economy. With higher purchasing power, Asia’s gross domestic product would grow to half of the world’s in 2050, and this would immensely benefit Asean, which should post intra-regional trade of US$600 billion this year against $160 billion in 2010. 

Mathew Verghis, lead economist of the World Bank, said the world economic problem had been caused by an economic imbalance, which needed to be initially resolved by the US and Europe before the full recovery of their economies resumes. 

 

No more two-digit growth, China says

However, the impact of financial measures issued by the US and Europe to developing countries in Asia was a sentimental issue, but had yet to really happen. China’s GDP was expected to increase by 7.8 per cent this year, and it was believed that China’s GDP growth rate would not reach double digits anymore. China’s GDP expansion was expected to decline from more than 10 per cent in previous years to only 5 per cent in 2030 with an average of 6.6 per cent. However, China would become the world’s biggest economy.

“By transitioning to a high-income country, China needs to increase international trade within Asia. The booming economy of Asia will lead to increasing income and purchasing power of people. China itself has less domestic demand in comparison to a huge surplus of supplies. With the implementation of the AEC, Asean members have different competitive edges. For Thailand, the country needs to improve its taxation system and some other weaknesses,” Verghis said.

Roong Mallikamas, director of the Bank of Thailand’s Monetary Policy Office, said it was hoped that the US economy would be better, but there should not be too much concern about the fiscal cliff. 

“I myself believe that the United States Congress will be able to solve the problem and that it will impact only 50 per cent of the fiscal sector. For Europe, we think that the recession is due to its structural problem. The recession in China has been progressing gradually and that should not be a worry.

 

AEC could create problems

“The world economic problem, however, has impacted the Thai economy – both the trading and financial sectors. Despite the slowdown in exports, the Thai economy can grow by domestic consumption. The unemployment rate in Thailand is still low and the economic stimulus measures such as the first car scheme will benefit the country until next year, when the economy is expected to be better than this year,” she said. 

Luis Breuer, the International Monetary Fund’s mission chief to Thailand, said continued economic crises in the US and EU were more serious than in the past six months and were high risks to cause a global economic downtrend in both developed countries and emerging markets such as Brazil, India and China. The IMF forecast world economic growth of 3.3 per cent this year and 3.6 per cent next year.

However, the regional integration in Asean would create problems rather than a success story due to their complicated thinking and operation.

“We are entering into a fragile environment and everything is delayed and there is lower growth in different factors. Asia is slated for high growth but also higher risk. Asia should learn from other countries as its role is changing. It will consume more natural resources such as oil, iron or copper to create an impact on other countries at the same time they will rely more on Asia,” he said. 

Erh-cheng Hwa, chief economist of China-based Baoshang Bank, said the US’ fiscal cliff had challenged its economy in the medium term. This is reflected in its growth, which was lower than Spain’s. However, the US economy was going on due to the value of the dollar, which is now saved as foreign reserves in countries worldwide despite the US recession. But the eurozone crisis was bringing instability while China’s economy was still cooling off and facing high market risk.