October 30, 2009 08:01
A UN report forecasts a return to growth in Asian economies and trade in 2010. But UN economists recommend Asian governments increase trade within the region and become less dependent on markets such as the United States and Europe.
The report by the UN Economic and Social Commission for Asia and the Pacific says Asia's growth strategy needs to refocus on increasing trade within the region.
The report recommends reducing Asia's high dependence on global export markets. Exports to developed economies such as Europe and the United States have driven growth in the past five decades, but UN economists say it is time to increase regional trade and domestic consumption.
The report comes as Asia is showing signs of a recovery after the sharp decline in trade during the past year due to the global financial crisis.
Ravi Ratnayake, an economist and director at UNESCAP, says the outlook for Asia next year is upbeat, with China's economy expected to lead the way in gross domestic product growth. "Well, 2010 we are looking very positively, in fact most of these countries in the region going to see some positive signs in GDP growth as well as export growth," Ratnayake said. "We are forecasting the whole region will have growth, export growth, of 6.3 percent, while some countries like China will have higher rates of export growth."
The report also highlights China's growing role in the region, with its contribution to regional trade "almost doubling" during the past decade. But the report cautions that despite strong growth in India and China, the global financial crisis is "far from over". It warns that financial markets remain volatile and large budget deficits and excessive foreign exchange reserves remain in many countries.
The report also expresses concern about the strength of growth after governments phase out economic-stimulus programs in the coming months. The report says the outlook for foreign direct investment in Asia is good, especially in Thailand and Vietnam. But it warns the trade slump during the past year has led to massive unemployment and pushed more people below the poverty line.
Ratnayake says governments need to maintain open trade and reduce tariffs to help lift millions of people out of poverty. "We believe that still in the region there are high barriers," Ratnayake said. "If you reduce these tariffs substantially in the region within the intra-regional trade, if you reduce the barriers from that, it will lead to a reduction of poverty by 43-million people. So intraregional trade, coming from basically removing tariff barriers can lift many millions out of poverty."
The United Nations says governments should play a larger role in ensuring more balanced growth. It also says that inclusive and sustainable development can only be achieved by keeping national economies "as integral parts of regional and global economies".
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