Everyday English – Slump creates social crisis in Asia

• Source: Global Times
• [18:25 June 19 2009]
• Comments

The global economic crisis is also a social crisis in Asia, with an estimated 60 million people remaining mired in poverty due to falling growth rates, an Asian Development Bank (ADB) executive has said.

"The social consequences of the economic crisis are very severe," Rajat M. Nag, ADB managing director general, said in an interview with the press. "That is our biggest concern."

Nag said the estimated 3-percent drop in GDP between 2008-9 in developing Asia – excluding Japan, Australia and New Zealand – meant 60 million people would fail to emerge from poverty.

An extra 10 million people would be undernourished and around 56,000 more children aged five and under would die.

He made his comments on the sidelines of the World Economic Forum on East Asia in Seoul, where speakers agreed the region must rebalance its export-led growth model to cope with shrinking Western markets.

"Asia will need to sell its products to itself more than it has," Nag said.

Developing Asia at present exports 60 percent of its production to Japan, the eurozone and the US and "that cannot continue forever."

Asia must boost consumption – an important part of poverty reduction – by saving less and spending more, he said.

He said the regional savings rate was very high, largely to compensate for the lack of welfare programs.

"People save for old age, people save for ill health, people save for education,"Nag noted.

"Is it more efficient for people to save individually for what is essentially a social protection network, or is it more efficient to save collectively as a nation?"

Service industries should also be encouraged, he said. At present, services in Asia are difficult to access because of protectionist or other measures.

Nag also called for greater Asian integration on environmental and infrastructure matters.

"The center of gravity of economic power is shifting to Asia... Asia needs to cooperate and integrate within itself," he remarked.

Average growth in developing Asia was 6.3 percent in 2008 and the ADB forecasts 3.4 percent this year, rising to 6 percent next year. "We think we have seen the worst of it,"Nag said.

But he cautioned that the biggest threat to recovery was "to think of green shoots as more than green shoots" and slow down on reforms and stimulus measures.

In earlier comments to the economic forum, the ADB executive expanded on what he called the most worrying aspect of the economic crisis.