Asia can become the “driver of a collective effort” to achieve more balanced and sustainable global growth, French finance minister Christine Lagarde said yesterday in Hanoi.
A study released yesterday on the prospects for growth up to 2050, suggests that Asia could expand, to comprise more than half of global GDP by mid-century – and that prosperity could be evenly spread and with “no poor countries”.
The report Asia 2050, published by the ADB, was described by China’s deputy finance minister Li Yong as a “blueprint” for policymakers.
Lagarde told a press conference that many of the challenges faced by Asia are common to the rest of the world. The G20, which France is chairing this year, is also aiming to “provide a framework for sustainable and balanced growth,” she said, adding that Asia has a critical role to play in supporting this process.
ADB president Haruhiko Kuroda said that the report pointed the way to overcoming “destabilizing” income gaps that would “undermine growth”.
Asia, by the year 2050, could be vastly richer than it is now, with this wealth spread evenly among its people, or it could enter a “middle income trap” of relative stagnation, the ADB report suggested. Or it could even “stumble into financial meltdown, major conflicts or region-wide chaos.”
By 2050, Asia (defined as including 31 countries across the region, including Central Asia and the Pacific) “could by 2050 account for more than half of global GDP (compared with 27% now) and more than half of global trade and investment”, the report says.
The continent’s annual per-capita income “could rise six-fold [from $6600 to $39,000] to reach the global average and be similar to European levels today. This would make affluent some 3 billion more people who now live in relative poverty. Asia would have “no poor countries.”
Seven Asian countries (China, India, Indonesia, Japan, South Korea, Malaysia and Thailand), will lead Asia’s growth and by 2050 could account for 45% of global GDP, the report suggests. Their average annual per capita income could reach $45,800 – 25% higher than the global average of $36,600.
But China and India “now face the biggest risk” of falling into a Latin-American style middle income trap,” i.e. they rise out of poverty but cannot achieve high income status, says the report.
“More Asian countries need to emulate Japan, Singapore and South Korea, and come closer to the global best practice.”
Things that could go wrong for Asia, the report suggests, include rising income and social inequalities, increasing competition for natural resources, growing regional disparities, global warming and climate change problems. A decline in standards of governance and institutions would also spell danger.
“Cross country disparities in income and opportunities, if left unchecked, could breed instability or even spark conflicts in parts of Asia.
“Long-term projections of Asia through 2050 cannot rule out the possibility of a ‘perfect storm’ scenario whereby a combination of bad macro policies, exuberance combined with lax financial sector supervision, conflicts, natural disasters, climate change risks, demographic change and weak governance lead to a major setback in growth.
“Under this doomsday scenario Asia could stumble into a financial meltdown, major conflicts or region-wide chaos well before 2050.”