Limited diversification in exports and broader economic structure have long been underlying characteristics of many developing and, in particular, frontier economies. Yet some have shown a remarkable economic transformation, especially over the past two decades. In particular, it has been argued that emerging Asia, and more recently frontierAsia, has benefited significantly from diversification. This chapter examines this claim with a comprehensive look at the facts, employing newly developed data sets covering diversification in both external trade and
FrontierAsian economies are poised for continued rapid growth. 1 Their per capita incomes may be relatively low compared with the rest of Asia at present, but they are clearly on a path to becoming the next generation of emerging market economies, and their populations will provide the next large market of middle-class consumers. Moreover, these countries are becoming increasingly integrated into a vibrant regional trade network that holds great promise. Lessons from within the region attest to the importance of trade openness as a vehicle for rapid
With a combined population of more than 350 million people, frontier and developing Asia, which includes countries such as Vietnam, Cambodia, and Bangladesh, is located in the world’s fastest-growing region and has favorable demographics. The countries share a number of common macroeconomic, financial, and structural challenges. This book addresses issues related to economic growth and structural transformation, as well as the risk of a poverty trap and rising income inequality.
Limited diversification in exports and broader economic structure have long been underlying characteristics of many developing and, in particular, frontier economies. Yet some have shown a remarkable economic transformation, especially over the past two decades. In particular, it has been argued that emerging Asia, and more recently frontier Asia, has benefited significantly from diversification. This chapter examines this claim with a comprehensive look at the facts, employing newly developed data sets covering diversification in both external trade and domestic production.
economies ( Box 1.1 ). Investor enthusiasm for these frontier markets, however, also reflects a search for yield and unconventional monetary policy in advanced economies that have driven interest rates to historical lows and could present a challenge if the tide were to change.
FrontierAsia: Prospects for a Bright Future
More than 350 million people live in frontier and developing Asia. 2 Although these countries face many challenges, they are part of the world’s fastest growing region, with favorable demographics. In the following chapters, these countries are
conditions, have resulted in increased investment portfolio allocations in frontier assets. A large number of lower-income countries, especially in Asia and Africa, have experienced prolonged growth spurts and significantly improved fundamentals, lending credibility to their claim to be considered frontier economies. As a group, frontierAsia has experienced growth over the past two decades averaging 6 percent, which only China and India have surpassed. Frontier economies have benefited from a supportive global environment of relatively low interest rates and high
International Monetary Fund. Western Hemisphere Dept.
scope for further gains in financial inclusion. To identify such possibilities, we have constructed gaps with respect to an Asian benchmark—a recognized success story on financial inclusion in countries with relatively strong fundamentals.
12. Guatemala is broadly in line with its own fundamentals on financial inclusion of households and firms though it falls behind the world “frontier” Asian economies . Financial inclusion gaps in relation to domestic fundamentals are virtually zero for both households and firms though there are large negative gaps, compared to
Mr. Gerard J Almekinders, Mr. Alex Mourmouras, Ms. Jianping Zhou, Satoshi Fukuda, and Yong Sarah Zhou
The establishment of the ASEAN Economic Community (AEC) at end-2015 has brought into sharp focus the issue of financial and economic integration in the region. This paper takes stock of ASEAN’s financial integration and prospects. ASEAN integration could accelerate in the years ahead; it will likely be a safe, gradual process consistent with the “ASEAN way” of consensus decision-making. Properly phased and sequenced, closer financial integration has the potential to help increase real incomes and accelerate real convergence within ASEAN and narrow the region’s gap with advanced Asia. Realizing the promise of financial integration will require ASEAN countries to make long-term investments in financial infrastructure. Policymakers can draw on the experience of their more advanced peers and of other regions. Gradualism and safeguards should not be excuses for inaction or financial protectionism. Reliance on flexible policy frameworks and a strengthened and tested regional financial safety net should be part of the agenda. Closer engagement with the Fund could also help.
International Monetary Fund. Asia and Pacific Dept
decelerated in recent years and the region needs a new wave of reforms to boost potential growth and to continue to attract inward investment (see Box 1.4 ). The agenda varies across economies. In India, FrontierAsia , and ASEAN , it involves removing structural impediments to growth through regulatory reforms and higher infrastructure investment. In China , reforms to liberalize the financial system and raise the cost of capital are key to improving resource allocation, reducing the dependence of the economy on credit, and rebalancing growth away from investment. In
, Runchana , and Olaf Unteroberdoerster . 2011 . “ Financial Integration and Rebalancing in Asia. ” IMF Working Paper No. 11/243 , International Monetary Fund , Washington .
Purisima , Cesar V. 2014 . Keynote remarks at the Center for Strategic and International Studies, forum on “The Promise of Regional Integration: Protecting and Strengthening ASEAN Centrality, ” Washington , April 10 .
Schipke , Alfred . 2015 . FrontierAsia: The Next Generation of Emerging Markets . Washington : International Monetary Fund .
Vargas , M. 2014