Worst of euro crisis is over but challenges remain – ADB

MANILA, Philippines – The worst is over.

This was the assurance of Asian Development Bank (ADB) president Haruhiko Kuroda regarding the financial-turned-economic crisis in the eurozone area.

“The worst phase of the European crisis may be over,” Kuroda said during a press briefing on Wednesday, May 2, at the 1st day of the 2012 ADB Annual Governors’ Meeting in Manila.

He said the economies of the crisis-hit countries in Europe — which are trade partners of host to thousands of migrant workers from ADB’s member countries — have stabilized in the past months. He cited as reason “the liquidity provision by several central banks, the successful debt reduction of Greek government bonds and various efforts of by eurozone countries.”

But he stressed that challenges linger. “There are still imbalances. There are challenges… but we don’t expect serious impact on Asia in the near future.”

Asian countries, including the Philippines, have been closely watching the goings on in the eurozone area for their impact on the local economy.

The Philippine’s economic growth slowed to 3.7% in 2011 from a robust 7.6% the year before largely due to a slump in exports as demand in countries like those in Europe almost ground to a halt as governments implemented austerity measures and citizens became wary of their job security.

Various European countries are also hosts to Filipino migrant workers who send money to loved ones at home. These remittances fuel consumption, which in turn affect investments and overall economic growth.  

Both the eurozone crisis as well as the geopolitical challenges in Middle East and North Africa did not affect total Philippine remittances, which reached another record high in 2011.

“The overseas remittances were not affected by global events because half of the 9 million [Filipino] workers are in North America, working in offices, schools, etcetera, rather than in factories or construction,” Kuroda noted.

Nonetheless, he noted that remittances elsewhere suffered from these global events. He cited the lesser money sent home by South American workers. “It depends on each country,” he added.

Inclusive growth

Kuroda also tackled this year’s theme of “inclusive growth” for the ADB annual meeting.

ADB’s anti-poverty efforts are geared to help benefit and reach “several hundreds of millions of Asians who continue to struggle on less than $1.25 a day.”

“The very drivers of Asia’s economic success – new technology, globalization and market-oriented reforms – have also served to create and increase disparities within and among Asian economies,” Kuroda said.

ADB economists point to Gini coefficient, a measure of income inequality, or a check on how the benefits of economic growth are felt by a few.

ADB previously noted that average income inequality in Asia increased to 46 in late 2000s from 39 in the early 1990s. The Philippines’ Gini Coefficient decreased from 49 in the late 1990s to 45 in 2009.
 
Kuroda noted that while there is a measure of inequality, the multilateral bank has no single and comprehensive indicator for inclusiveness.

“We have more than 20 indicators showing how developing countries perform in their efforts to improve standard of living. Can we make a composite indicator assessing inclusiveness of growth? That’s an interesting point,” he noted. – Rappler.com