2014 will be remembered as the year when China became the world’s biggest economy in purchasing power parity terms, overtaking the United States for the first time in history. This move is further evidence of the rising role of Asia on the international stage in what some already call the “Asian Century.”
In 2015, Asia will continue to be the driving force in world economic growth. According to a recent outlook report from the Asian Development Bank, the region is projected to grow at 6.4% in 2015.
Underpinning economic growth in Asia is not only the rise in domestic demand, particularly for middle-income countries such as Thailand and Malaysia, but also an increase in foreign investment in less developed countries such as Cambodia, Laos, Myanmar, and Vietnam. Overall, the emerging Asian economies are expected to grow by 6.9% a year from 2014 to 2018.
Asia’s vulnerability: Rising inequality, lower economic mobility
After decades of sustained economic growth that has led to a substantial reduction in poverty, Asia is experiencing new social tensions and economic vulnerabilities due to the global economic crisis, slower growth rates in emerging economies, concerns about water and food security, and weak or non-existent social safety nets. Rising inequalities and a growing demand for more equal opportunities make it imperative to think of economic growth in a more qualitative and inclusive manner, with not only less pronounced income gaps between the poor and the rich, but also better access to education and heath, and more equal opportunities to benefit from the “growth dividend.” Both the inequalities within countries as well as the disparities across economies are threatening the long-term growth prospects of Asia.
In 2015, Asia will find that stronger regional economic cooperation, including through the South Asian Association for Regional Cooperation (SAARC) and ASEAN, will be essential to achieving more equitable and inclusive growth.
The role of regional cooperation
After decades of looking to the West, Asia is starting to think and operate more regionally. The 10-member ASEAN and the 8-member SAARC groupings are taking the lead to strengthen trade and economic links in their respective regions.
However, Asia is still home to two-thirds of the world’s poor, and economic growth both domestically and regionally must aim to include the most vulnerable and disadvantaged.
To be successful in the long term, regional cooperation will have to focus on more inclusive and sustainable growth. Similarly, in order to meet the ambitious post-2015 Sustainable Development Goals, governments, policymakers, social and economic actors, as well as the international community, will need to pay as much attention to regional challenges and regional governance as to domestic ones. If Asia can closely integrate as a regional bloc while moving toward a more inclusive and sustainable future, then the 21st century will definitely be the “Asian Century.”
Véronique Salze-Lozac’h is chief economist and senior director for The Asia Foundation’s Economic Development Programs. Based in Thailand, she joined The Foundation in 2003, after working for both the public and the private sector on private sector development, foreign investments, business environments and policy reforms. Co-authors Amy Warren and Nicolas Picard are program associates, and Ka Wai Wong is the Foundation’s Australian Youth Ambassador for Development in Bangkok.
The views and opinions expressed here are those of the individual authors and not necessarily those of The Asia Foundation.