Asia to play vital role in global economy
2011-02-17 16:38:10
A fragile recovery in advanced nations means Asia will increasingly play a more vital role in the global economy.
That's according to Singapore's Trade and Industry Minister Lim Hng Kiang. He was speaking to 1,400 participants of the 8th Annual Citi Asia Pacific Investor Conference here.
Even after two rounds of quantitative easing, the US economy is witnessing a patchy recovery, while investors are still concerned about the sovereign debt overhang in Europe.
But Asian economies are faring much better.
Mr Lim said the region's resilience will help it lead the global recovery.
"The outlook for Asia is positive. Although the region's growth is expected to settle to a more sustainable pace, Asia will remain at the forefront of the global recovery," Mr Lim said.
"Despite facing challenges from large capital inflows and inflation, I am confident that Asian policy-makers will make appropriate policy adjustments in order to achieve long-term sustainable growth."
Mr Lim added that infrastructure financing is likely to be a major driver of demand for investments in Asia.
He said the Asian Development Bank estimated that US$8 trillion in infrastructure spending is needed in the 10 years leading up to 2020, to support Asia's growth.
The demand for capital investments driven by the growth in Asia's real economy, he said, would support the development of the region's capital markets.
With increased investments in Asia, the depth, accessibility and efficiency of Asia's capital markets would continue to improve.
Mr Lim pointed out that with proper balance, the continuing inflows of funds, improvements in capital markets and growth in the real economy would create a self-reinforcing virtuous circle.
Along with the rise of Asia, Mr Lim said Singapore wants to further cement its role as a base for global players to tap into the opportunities in this region.
To do that, Mr Lim said Singapore will build on its strengths in trading, asset management and infrastructure financing.
He added that the city-state would also continue to emphasise the importance of enhancing transparency, strengthening risk management and building depth and diversity for its financial products and services.
However, Citigroup's global chief economist Willem Buiter warns that rising food prices can pose a significant challenge to emerging economies.
"High food prices lead to the need for fiscal interventions through food subsidies, through lowering of food tariffs or taxes," Mr Buiter said.
"Buying off the political instability that comes with rising food prices, among other things, can be costly from a budget point of view
"And so those countries, where the authorities don't have oil based or gas based deep pockets and have a food price problem, will meet severe fiscal challenges."
He added it is critical to introduce more permanent measures to tackle rising food prices, as they are likely to remain a part of the economic landscape, going forward.