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Why this year will be crucial for global economy
Financial crisis in Europe could escalate and along with slow recovery in the US, this year will be crucial for global economy but Asian nations must continue long term structural reforms while insulating the region against the troubles, ADB said on Thursday.
"While authorities continue to strengthen macroeconomic resilience to shocks, we also need to reinvigorate focus on the region's long-term development goals," ADB president Haruhiko Kuroda said at the Governors' Seminar on Thursday morning.
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Why this year will be crucial for global economy
"The ultimate challenge is to continue transforming economies in a way that promotes peoples' welfare and reduces poverty," he added.
Meanwhile, an ADB report presented at the seminar said this year could prove crucial for the global economy as financial tensions in Europe could escalate further and there remains concern over fledgling economic recovery in the US.
Against this backdrop, the region must update its growth model to accommodate a 'new normal' -- prolonged restructuring in advanced economies -- and surmount obstacles to sustained and equitable growth in Asia, the report said.
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Why this year will be crucial for global economy
The global economic crisis is a wake-up call for Asia and policymakers have to boost Asia's resilience to external shocks in the near-term and also tackle the risks posed by ongoing global rebalancing and overall structural transformation, said the report.
Currently, the national focus is on containing crisis, risks from potential financial contagion and weaker trade, said the report -- How Can Asia Respond to Global Economic Crisis and Transformation.
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Why this year will be crucial for global economy
Asia can weather a renewed financial crisis and weakened export demand from developed markets, but long-term prosperity hinges on relying more on domestic and regional markets as well as expanding ties with Latin America and Africa, it said.
The Asian Development Bank is holding 45th annual meeting of ADB's Board of Governors in Manila.
Finance Minister Pranab Mukherjee will attend the meet which will discuss the global economic problems and deliberate on steps to promote growth and improve governance.
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Why this year will be crucial for global economy
Regionally, there is need for a strong, effective and adequately resourced financial safety net to complement national and global financial arrangements, the report said.
The report urges policymakers to keep monetary policy flexible to respond to extreme exchange rate volatility and use fiscal stimulus to support domestic demand if needed.
The greatest challenge for policymakers is to manage these near-term issues while maintaining Asia's successful, ongoing economic transformation as a global growth engine.
Specifically, growing inequality between rich and poor will eventually threaten the region's growth and stability, the report warns.
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Why this year will be crucial for global economy
To counter this, Asia must invest more in human development and social services to better equip its people to benefit from the opportunities of rapid growth.
The report said that key medium-to-long term measures to support this transformation include: rebalancing growth towards domestic sources -- consumption and investment; strengthening finance, deepening markets, and fostering financial inclusion;
improving the business and investment climate; preparing people for future jobs, upgrading industry, and environmentally sound urban planning; boosting intra-regional trade and expanding 'south-south' links; deepening regional cooperation and integration.