Dutch central bank warns economic downturn will affect emerging Asia

Dutch central bank warns economic downturn will affect emerging Asia

The increased level of (regional) integration among emerging Asian economies will not protect these countries from a renewed recession in the industrialised world, the Dutch central bank said.

Despite more intra-Asian trade reflecting the slicing-up of production chains, final demand still largely comes from industrialised countries.

Asia’s emerging economies have seen increasing integration into the global economy over the past few decades. In the past 30 years, their share in global GDP growth more than doubled. This larger integration process has also served to strengthen mutual economic ties between emerging Asian countries. This regionalisation is reflected in, among other things, the increased shares of intraregional Asian trade and of regional portfolio investments.

The increased role of emerging countries in the world economy and, especially, increased intraregional integration raises the question whether these countries would be able to decouple from an economic slowdown or recession in the industrialised countries.

If emerging economies are to decouple effectively from economic developments in the industrialised world, their growth should increasingly be driven by internal factors. Flexible exchange rates, but also measures aiming to reinforce social safety nets and other structural reforms in these countries may contribute strongly to such a development.

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