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Hanoi. Asia’s developing economies must invest more in infrastructure and social welfare to promote long-term growth in a region where millions fell back into poverty during the global economic crisis, an IMF official said on Monday.

IMF first deputy managing director John Lipsky said that, despite general macroeconomic stability, some threats remained and financial sector soundness must be further improved as the recovery took hold.

While Asia is helping lead the world toward stronger growth after the global crisis that began in 2008, the region’s developing economies face key policy challenges, Lipsky said.

“While the region’s story is very much a positive one it should not be forgotten that significant numbers of the region’s citizens remain poor or vulnerable. In developing countries, even small economic dislocations can provoke substantial challenges,” he said. The recent crisis pushed an estimated 14 million people back into poverty in Asia, Lipsky said. “Agricultural poverty remains a problem, partly reflecting a widening gap between urban and rural income.”

Lipsky said some Asian developing nations faced large fiscal deficits and public debt, high credit growth and inflation and low international reserves.

He cited Asian Development Bank figures that showed Asia-Pacific countries needed to invest up to $8 trillion in infrastructure over the next decade.

“There are still large infrastructure gaps in developing Asia,” he said. “Such investments would not only boost productive potential but would also help to fight poverty, including in rural areas.” Social safety nets should be strengthened “to protect the poor and vulnerable and to raise access to basic public services including health care,” Lipsky said.

While global growth is expected to reach about four percent this year, the economies of “emerging Asia” are forecast to expand by 8.5 percent, led by China and India, he said.

Anoop Singh, the director of the IMF’s Asia-Pacific department, said the region’s eight low-income countries should see growth rebound to about 6 percent over the next two years. The eight are Bangladesh, Cambodia, Laos, Mongolia, Nepal, Papua New Guinea, Sri Lanka and Vietnam.

Inflation in the low-income economies seems driven by food and fuel prices, “and we have to be careful to ensure that this does not feed into broader price pressures in the economy,” Singh said. Collectively, the eight countries have a deficit in their current account, which measures trade and financial transfers, he said. “The main point is to make sure that the FDI and capital inflows are sufficient and sustainable to finance it.”

 

Agence France-Presse