Asia urged to rethink growth policies
BALI, Indonesia -- Asia's governments must spend more on social safety nets and reduce their reliance on export-driven growth even as they grapple with an economic meltdown that will keep tens of millions trapped in poverty, finance officials said Sunday.
Japan also announced a $60.5 billion currency swap scheme that could be tapped by Asian nations facing a liquidity squeeze.
Faced with the worst global slump since World War II, many of Asia's economies are in free fall as demand for their exports — long the engine of the region's growth — evaporates in big Western markets.
The Asian Development Bank, holding its annual meeting in Bali, Indonesia, has warned that 61 million people will remain trapped in extreme poverty this year because of the global slump. That figure will increase to nearly 160 million if slow growth continues next year, it says.
The bank's president Haruhiko Kuroda said the collapse in global trade has "gathered momentum" as export markets suffer a massive contraction.
"This grave situation needs more vigorous and concerted efforts by all concerned to bring growth in the region back," he said.
Some governments in Asia — Japan and China's among them — are already blasting their economies with hundreds of billions of dollars in stimulus spending. But it is too early to say whether this pump-priming is working, while many other governments in the region are too poor to fund such largesse.
"Asian countries must restructure their economies and focus more on domestic demand," Japan's Finance Minister Kaoru Yosano told the annual meeting.
"The Asian region needs to prop up domestic demand to avoid economic meltdown," said Yosano, also a governor of the ADB, to which Japan is a major donor.
Boosting Asia's spending on social protection — currently the lowest of any region — is a crucial step to take for boosting confidence and reducing the human cost of an economic downturn, he said.
Separately, Yosano said Japan will set up a yen currency swap scheme worth $60.5 billion, giving nations with weaker currencies access to yen in the event of a liquidity squeeze.
