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South Asia can weather economic crisis,
says new study
MANILA, PHILIPPINES - South Asian countries can weather
the global financial crisis by taking both short- and
long-term measures to stimulate their economies, says
a new study commissioned by the Asian Development Bank
(ADB).
The study titled The Impact of the Global Economic Slowdown
on South Asia notes that the subregion has been hit
by capital outflows and weaker commodity prices, and
faces a sharp slowdown in exports and remittances as
the global troubles worsen.
A number of short-term measures have been taken to cushion
the impact of the crisis, including monetary easing
and fiscal stimulus packages. The study suggests there
is further room for interest rate reductions, particularly
in India and Sri Lanka. While most countries have little
scope for large stimulus packages, given deficit constraints,
India, which has introduced two of them, should disburse
the funds swiftly for maximum impact, the study says.
It adds that governments could consider incentives to
encourage overseas workers to remit money home, such
as special savings instruments, and they should also
discuss currency swap arrangements and other measures
to keep their financial systems stable.
In the longer term, South Asian countries need to reduce
their fiscal deficits, diversify their economies, step
up infrastructure investment and boost intra-regional
trade to take up the slack of lower demand from G7 nations,
the study says.
“While some countries in South Asia have had relatively
less exposure to the crisis from the adverse impacts
of capital flows, more than half of the 900 million
people in developing Asia who survive on US$1.25 a day
live in the subregion, so any tempering of growth is
a serious cause for concern,” says ADB President
Haruhiko Kuroda.
The study was presented as a discussion paper at the
South Asia Forum on Impact of the Global Economic and
Financial Crisis, a two-day forum held at ADB headquarters
on March 9 and 10. Participants include former Managing
Director of the International Monetary Fund, Michel
Camdessus, former Philippines President, Fidel V. Ramos,
and former Vice Minister of Finance, Japan, Makoto Utsumi.
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