Asian economies are poised to recover earlier from the global downturn than others are, thanks to the region’s stable financial systems and new efforts to boost domestic demand, Malaysia’s central bank governor said yesterday.
“I believe that the Asian region holds the greatest promise for generating growth earlier than other parts of the world,” Tan Sri Dr Zeti Akhtar Aziz, governor of Bank Negara Malaysia, said in an interview in Beijing where she was attending a conference. Asian countries are working more closely together than before to support each other, she said, which should contribute to a more balanced global economy.
“Of course we did not escape the economic contraction that occurs through the trade channel, but our financial systems remain sound and solid,” she said. In April, bank lending grew 10.6 percent from a year earlier in Malaysia, and 29.7 percent in China, according to central bank figures. With credit expansion, “we have the opportunity when conditions stabilise to resume stronger growth,” Zeti said.
Malaysia’s economy shrank 6.2 percent in the first quarter of 2009 as exports collapsed, but those of China, India, Indonesia and Vietnam continued to grow. The International Monetary Fund forecasts Asia’s emerging economies to grow 3.3 percent this year, compared to an expected contraction of 1.3 percent in the global economy.
Zeti said financial reforms made after the 1997-98 Asian financial crisis helped improve banks’ risk management and alleviate the impact of the current downturn. “It would have been very much worse if we had a fragmented and fragile financial system,” she said.
Still, the downturn has exposed how many Asian countries have been heavily dependent on consumer spending in the US and Europe for fast growth. Zeti said it’s clear adjustments are needed in Asia’s economies. “You cannot just focus on continued export-led growth,” she said. “One of the new strategies of Asia is to promote domestic demand.”
Malaysia has made some progress, Zeti said, noting that consumption now accounts for 53 percent of its economy, compared with 42 percent a decade ago. “We’re reducing savings and increasing consumption,” she said, arguing that Asian countries’ stable financial systems will make it easier for them to lift consumer spending in coming years. “Of course these things cannot happen overnight, but the trend is there, and this trend will intensify,” she said.