Asia will be affected by the expected slowdown in global growth, however Asian exports will remain robust, mainly due to the strength of intraregional trade, predicted Haruhiko Kuroda, president of the Asian Development Bank (ADB), speaking at a conference in Brussels this week.
He added that demand from emerging economies is also playing a key role in maintaining the region's level of exports.
"It appears that our region's economic expansion in 2008 will remain robust, perhaps a percentage point or less below 2007 growth of around 8.5%. In fact, many economists are hoping that the US slowdown will help China ensure its economy avoids overheating,” Kuroda remarks.
He was addressing the delegates attending a conference jointly organised by ADB and the European Commission, examining the Asian regionalism, and means of encouraging greater Asian-European integration.
Although maintaining an optimistic outlook, Kuroda also highlighted some of the risks facing the region, noting the inflation as a key concern. “Inflation, mostly from high food and energy costs, but also from continued capital flows, will limit policy options for monetary authorities,” he comments.
“Global financial volatility is always a significant concern, although the region had limited and apparently controllable exposure thus far to the US subprime crisis,” he adds.
He went on to advocate greater Asian regionalism as a means of maintaining financial stability. Although in terms of trade, the region is highly integrated, financially he argued Asian countries were lagging behind Europe.
Among a number of suggestions for encouraging regional cooperation, he suggested that there needed to be “greater harmonisation of financial systems in response to private sector demands for trade finance and cross-border intraregional investment.”
Other suggestions included the strengthening of local currency bond markets as an alternative to dominant bank financing, and a means of financing infrastructure through innovative instruments.
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