Perspectives on Asia
by Robert Horrocks, PhD
Over the next decade, I expect Asia’s economies to continue to raise living standards and to narrow the income gap between its own citizens and those in the U.S. or Europe.
Why do I think this? Asia continues to have a high savings rate. A country cannot invest or grow over the long term without a pool of savings, and it can be risky to rely on external funding to finance domestic growth. Asia currently has enough savings to support its own development. It also has a track record of increasing productivity through improving education. The region has championed the individuals’ desire to make money. It has successfully opened its markets to the world in order to learn about new products and methods of industrial organization. Finally, it has a decent track record of government policy reform to support growth and markets. None of this has been perfect; and indeed, although rates of change have been fast, Asia is still a relatively poor part of the world. Over the long term, all of this just means that there is plenty of blue sky ahead.
But what about the next year? Much will rest in the hands of central bankers and still more will depend on Asia’s reform progress. For those who think it is too easy to focus on the future and too dangerous to dismiss the near term, I will be watching the following during 2015 to see how Asia’s growth is progressing.
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