Vice President, Asian Development Bank
The Asian Development Bank predicts growth in the region this year to hit 5 percent. How do you evaluate the risks to the region?
There are a couple of factors that we are paying attention to at the moment. And there are three, particularly, that we are focused on.The first is unanticipated monetary policy change in the United States.The second is any slower momentum in the recovery that we've seen in the US and the Eurozone.And lastly is a, perhaps a deeper than anticipated slowdown in the PRC. We're projecting growth in China of about 7.5% this year. But if that growth were significantly slower, that would of course force us to reconsider our numbers for ASEAN and for developing Asia as a whole.
We think there is inevitably going to be a slowdown in the Chinese economy. We're seeing that going gradually, from 7.7% last year to 7.5% this year and perhaps 7.4% next year. If that slowdown were to be deeper, one way that that slowdown could be deeper is if... there has been quite a lot of credit growth in China, and if there was efforts on the part of the authorities to squeeze down on that credit growth too vigorously, that could transmit into much lower growth than we're projecting at the moment.Another risk that's posed by of course a deeper slowdown in China is the impact that that will have on commodity prices in the region, which of course some of the economies are more dependent on the export of commodities than others are. So at the moment, again, we think those risks are relatively small and the countries are managing those risks well, but we have to keep an eye on it.
Political tensions between Vietnam and China, or the unrest in Thailand could also weigh down the regional economy.
I think that focus at the moment, with respect to these tensions, has been on a couple of areas. But trade has continued between most of these counties and has continued to be quite robust. So, again, we don't in anyway want to dismiss the fact that these tensions are there, but we also think it's incredibly important that these countries continue to focus on the structural changes that are necessary to make their economies more resilient, and to make the kinds of changes that are going to make growth much more inclusive in the long run. And it will help reduce these kinds of instability in the future.
Leaders of the Association of Southeast Asian countries are aiming to complete economic integration by the end of 2015. How will this help the region?
We think that the commitments that have been made, with respect to ASEAN Economic Community of 2015, are doubtlessly positive. We think that the progress that has been made is also quite good, we've seen somewhere around 78, 77% of the commitments have been reached. But will we have all of the commitment reached by the end of next year, which is the target deadline? No, not all of those commitments will be reached. But again, I think we prefer to look at this as a process as opposed to a single objective, and it's good to take stock at the end of next year and see what progress has been made and then chart a course for the future from that point.
What we've seen happen over the last couple of decades is that a lot of the low-hanging fruit has been harvested, and there had been great benefits to the harvesting of that low hanging fruit, some of the easier measures that can be undertaken. We're now in the much more difficult measures with respect to integration within ASEAN. So it's not surprising that these more difficult measures are more challenging.
The ASEAN economies have to diversify their trading partners, and I think that this is one of the real benefits of the ASEAN economic community of 2015, is that it's going to help deepen those ties amongst the trading partners within the ASEAN, and so that's going to help diversify those economies and so diversify those exports away from China alone. And making sure that we're removing trade and tariff and non-tariff barriers is an important step in order to make these economies more resilient.