On May 6, ISET hosted Shang-Jin Wei, Chief Economist at the Asian Development Bank. He gave a presentation entitled 'Asian Development Outlook 2016 – Asia’s Potential Growth'.

According to the key messages of the presentation, development growth in Asia softens to 5.7% in 2016 and 2017 from last year. Furthermore, while CPI (Consumer Price Index) inflation is subdued, many economies face harmful PPI (Producer Price Index) deflation. In addition, reforms to raise labor productivity can invigorate developing Asia’s potential growth.

Given the data of the outlook, Asia still accounts for 60% of global growth in PPP (Purchasing Power Parity) terms or 40% in market exchange rate terms. Moreover, slow recovery in global commodity prices will keep CPI (Consumer Price Index) at a low level in Asia.

He also stated that changes in US monetary policies have implications on worldwide trade, capital flows, and foreign debt; as the US dollar strengthens, it makes foreign debt burdens heavier.

Furthermore, Mr. Wei mentioned that the average regional growth rate (% per year) was higher in developing Asia compared to Latin America and OECD, but it has yet to be seen whether this growth rate is temporary or persistent. The answer, Mr. Wei says, lies in the estimation of “potential growth”, and potential growth itself depends on an economy’s institutions and economic structure.

However, according to him, the reforms significantly influence the potential economic growth of a given country. Developing Asian economies are still equipped with some policy space – both fiscal and monetary – in order to provide more aggregate demand if needed. He claimed that Georgia with Armenia, the People’s Rep. of China, the Philippines, Tajikistan, Thailand, and Afghanistan currently have space in both directions (fiscal and monetary) for boosting aggregate demand.