Developing Asia is challenged to sustain its growth momentum as the pace in its two largest economies moderates. Regional growth is expected to slide marginally from 6.1% in 2012 to 6.0% in 2013, before picking up to 6.2% in 2014.
Prospective tapering of quantitative easing in the United States destabilized emerging economy financial markets, including in developing Asia. However, fears of a repeat of the 1997 Asian financial crisis are unwarranted. The region is now in a stronger position to weather the storm, with many economies running current account surpluses and holding large foreign reserve stockpiles. The reforms instituted since 1997 strengthened macroeconomic management, financial regulation, and corporate governance.
Still, developing Asia faces the twin challenges of maintaining financial stability and sustaining growth. The recent financial turmoil has demonstrated all the more clearly the need for structural reform to support growth.
Governance reform is needed to sustain development momentum and ensure that the benefits of growth are widely shared. Improving public service delivery is an effective entry point toward wider governance reform.