The head of the International Monetary Fund warned a group of Asian economic ministers to increase measures to shield themselves from global economic shocks.
Dominique Strauss-Kahn, managing director of the global body, told participants in a two-day conference in Daejeon, South Korea, that the slower growth of the world economy could hurt Asian economies dependent on exports.
“The world is changing, and so does the ways in which Asia will grow and prosper,” he said. “This may now impact Asia’s economic performance for decades to come. So there is a need to do something in Asian economies to rebalance growth.”
Policymakers need to be prepared for “negative shock,” he said.
Asia’s 47 countries and 4 billion people make up 60 percent of the world’s population. The region was hard hit by the 2008 crisis, but economists now say it is leading the global recovery. The IMF predicts Asia will become the largest economic region in the world over the next two decades.
However, South Korea Finance Minister Jeung Hyun Yoon said a gap has grown between Asian countries creating inequality and imbalances. This has created other risks for sustainable growth, he said.
Meanwhile, 24 percent of the population in the Asia-Pacific still live in poverty, he said.
Strauss-Khan said Asian countries can create social safety nets and boost economic demand for goods to buffer the region from economic shocks. Improved infrastructure and a focus on investment can also help, he said.
This week’s Asia 21 conference brought together 300 economic leaders from around Asia, including Cambodia’s Finance Minister Keat Chhon and National Bank Governor Chea Chanto.
During meetings, Eiji Hirano, executive vice president of Japan’s Toyota financial service corporation, said Asia’s economies need to increase domestic demand to sustain growth and avoid risks in the medium and long terms.
Bank of Korea Governor Chhong Soo Kim said this can be done “by pushing investment in the human resources area, infrastructure and other sectors.” This will “strengthen its potential and rebalance the global imbalance,” he said.
Haruhiko Kuroda, president of the Asian Development Bank, pointed to China as a successful example. The country has shifted from external to internal demands, in part by improving its social safety systems, he said.