Developing Asian economies need more co-operation to counter the risks emanating from economic and financial integration, the Asian Development Bank (ADB) said in a report on Thursday.
In its new report titled Asian Economic Integration Monitor, the lender said close integration speeds up the transmission of a crisis in one country to another as has been seen recently in Europe. In addition, greater integration may increase the income inequalities within countries even as it reduces the inequalities between countries.
With integration rising and set to continue in Asia, the region's governments need to cooperate more to offset these risks, the report said.
"Developing Asia's strong economic growth is in large part due to increased economic and financial ties within the region but greater integration can bring contagion and other risks and we must address those threats through closer cooperation," said Iwan Azis, Head of ADB's Office of Regional Economic Integration.
To offset the risks from greater integration, ADB proposed a number of measures to be implemented by Asian governments, including strengthening safety nets like the swap arrangements, building more transport links and improving its policy, regulatory and institutional frameworks.
Meanwhile, it noted that internationalizing the renminbi is likely to boost regional cooperation and integration, particularly in East and Southeast Asia.
The report said that the external environment for Asia has worsened given Europe's continuing sovereign debt and banking crisis, and the weak US economic recovery. Destabilizing capital flows and a larger-than expected slowdown in China are also major risks to the region's economic outlook.
ADB forecasts developing Asia to grow 6.6 percent in 2012 and 7.1 percent in 2013.
by RTT Staff Writer
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