Asia can weather the financial and economic storms brewing in Europe and the US with only a slight slowdown in economic growth, Asian Development Bank president Haruhiko Kuroda told Emerging Markets yesterday.
But if the sovereign debt crisis in Europe is allowed to deteriorate further, with contagious affects on the banking system, that could have a “more serious” impact on Asian growth, Kuroda said in an interview.
The ADB president said that he was confident that the institution had sufficient capital resources to meet demands of its borrowers. But that could change if the ADB were called upon to rapidly disburse loans, as it did after the 2008 financial crisis.
He also speculated that the IMF might need additional financial resources in the light of the “huge” volumes of funds required by crisis-hit eurozone countries.
“Economic growth across emerging Asia [excluding Japan] remains quite robust,” said Kuroda, who noted that the ADB had scaled down only slightly its projections for the region’s leading economies in view of the developing crisis in advanced economies.
The region’s economic powerhouse, China, will play a key role, he argued. Whereas a few months ago the ADB expected growth across emerging Asia in 2011 to be 7.8%, it is now projecting 7.5% within which China is expected to grow at a very robust 9.3%, Kuroda pointed out.
Those rates are “still very high”, but should prove to be “sustainable,” said Kuroda. He appeared more optimistic than others who have suggested at the annual meetings that the potential impact of the eurozone and US problems on Asian and other emerging markets could be marked, via trade and capital flows.
“Make no mistake, the global South is not immune to mis-steps in the global North,” IMF managing director Christine Lagarde warned in her opening address to governors yesterday that advanced economies “will manage only an anaemic 1.5-2% growth” this year and next.
The ADB saw a huge surge in its lending at the time of the global financal crisis three years ago, and had to go to shareholders for an unprecedented 200% increase in its capital base. This has left the bank in a relatively strong position to deal with the current crisis, Kuroda said.
But its soft-loans arm, the Asian Development Fund (ADF), is in need of replenishment. Kuroda said he hoped that donors in advanced and emerging economies would give “generously” to the ADF, to help meet the needs of the region’s poorer countries.