Edited by Donghyun Park, Sang-Hyop Lee and Andrew Mason
Chapter 4: Population aging and aggregate consumption in developing Asia
While developing Asia’s financial systems were largely unscathed by the global financial crisis in 2008 and 2009, its real economies were hit hard by the deep recession in the European Union (EU) and the United States (US). Nevertheless, overall developing Asia recovered from the global crisis with remarkable resilience. The region managed to grow by 6.7 percent in 2008 and 5.9 percent even in 2009 when the world economy as a whole contracted. Growth has picked up further to 9.0 percent in 2010 and is projected at 7.8 percent in 2011 and 7.7 percent in 2012. Although these growth rates are below those before the crisis – 9.4 percent in 2006 and 10.1 percent in 2007 (ADB, 2011) – the speed and strength of the region’s rebound has surpassed all expectations. It was initially driven by fiscal and monetary stimuli, but subsequently private demand is playing a bigger role. It is tempting to view this resilience as evidence of the region’s decoupling from the economies of the EU, Japan and the US (G3) as the region has continued to grow robustly despite their fragile and uncertain recoveries. The region’s exports and economic growth did, however, plummet during the depth of the global crisis, primarily due to severe recessions in the G3, so the crisis has far-reaching implications for the region’s growth and development in the medium and long term. The G3 are saddled with a wide range of structural problems – high household debt and impaired housing markets – that will weaken their economic growth in the future. The obvious but troubling medium-term implication is that this weakness will deprive developing Asia of a traditionally important engine for demand and growth, so it is very much in the region’s interest to achieve a more even balance between domestic demand and external demand.
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