6. Keeping Asia at the Forefront
- International Monetary Fund. Asia and Pacific Dept
- Published Date:
- October 2018
Asia is the world’s most dynamic economic region. But it faces a number of serious challenges over the medium to long term—that its trade-reliant growth strategy will no longer be viable (at least in its current form), that population aging will weigh on many dimensions of economic performance, that productivity growth may not accelerate again, and that the ongoing digitalization of its economies may lead to major disruptions even as k boosts productivity over time.
What these forces will mean for the region’s future is squarely in the hands of Asian policymakers. Global trade tensions may well persist, and opportunities to export to advanced economies may be diminished. But Asia can offset this and create a new source of regional growth by liberalizing its relatively restrictive trade and investment regimes—particularly in services—and thus boosting intraregional trade. Productivity growth may be lagging, but policies to improve entry and exit and to help firms resolve their debt situation will help address some of the key micro-level drivers of the slowdown. And in terms of the digital economy, as discussed above, there is an important role for policymakers to play in developing education, infrastructure, and regulatory environments to allow their economies to reap the full benefits of digitalization and ensure that it can be a key growth engine, while taking steps to soften the accompanying labor market and other adjustments. While addressing these specific challenges, Asian policymakers will also need to do their part in ensuring continued regional and global policy collaboration, including via their engagement with, and governance of, global institutions.
To sum up, Asia’s growth may face serious challenges, but with continued sound policymaking, the region should have good prospects for staying at the forefront over the coming decade and beyond.
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Further country details are available in IMF (2018a).
IMF (2018a) provides a detailed description of the outlook for a range of other countries in the region.
This section is based on IMF (2018b).
The forecasts in Table 1 above have not been revised down as sharply as this since some of the tariff actions are still just proposals, and also because it is assumed that China implements substantial stimulus to bolster growth.
This section is based on IMF (2018c).
We follow the Organisation for Economic Co-operation and Development approach of McGowan and others (2017), which defines a zombie firm as one that is aged 10 years or older and has an interest coverage ratio (ICR) less than one for three consecutive years. The ICR is defined as the ratio of earnings before interest and taxes (EBIT) to interest paid.
Cross-country comparisons should be interpreted with care given idiosyncratic factors, including varying levels of corporate subsidies and other support.
This section is based on IMF 2018d.