Asia’s Post-Crisis Challenges
Although the impact of the recession in Asia was extremely rigorous, Asia is slowly recovering from global financial calamity. India is expected to recuperate slowly from this crisis with the help of rising business, favourable financial situations, private consumption advantages and improved employment outlook. In the midst of this global downturn Asia’s striking recovery is indeed commendable.
The primary reason behind Asia’s quick recovery is the return to normalcy which has been accentuated by the sudden collapse of trade and finance by the end of 2008. The swift, forceful and broad policy response is another key reason for Asia’s revival.
IMF’s latest forecast reveals that output in huge G-7 economies are expected to grow scarcely by 1.25% the following year. This is insufficient to recompense even half of 3.5% of the contraction estimated in 2009. G-7 consumption will therefore remain weak for quite some time. This will consequently limit the demand of Asia’s products externally.
However, luckily India’s dual engine has enabled it to expand the exports that preceded the crisis. The domestic demand as well as the investment brought about the largest portion of India’s growth. The supply-side should be overcome to enable India to sustain this expansion.
Another main policy challenge is to device a way out to go back to a prolonged and quick growth in this new global atmosphere of a softer G-7. This rebalancing calls for a detailed attention to many factors. The IMF is assisting countries to take up these challenges.
The crisis has however posed challenges to recover the growth model. It is time to execute policies to make domestic demand the second engine of growth.
