Asian economies should boost trade with each other to weather global shocks: IMF

The International Monetary Fund (IMF) has highlighted a crucial strategy for Asian economies to navigate the turbulent global economic landscape: boosting trade amongst themselves. As the region grapples with its significant reliance on imported energy, particularly from the Middle East, deepening regional integration emerges as a vital buffer against mounting external risks. Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, emphasized that increased intra-regional trade can not only insulate economies from repeated shocks but also create jobs.

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One way to insulate from repeated external shocks is to trade more with each other. (That in) itself is a buffer.

While Asia possesses immense growth potential and hosts some of the world's largest markets like China, Japan, and India, its trade patterns reveal a continued dependence on American and European markets for final goods. The IMF points out that only about 30 percent of final goods are traded within Asia, despite a higher percentage for intermediate goods. This underscores a significant, yet largely untapped, opportunity for growth and stability within the region itself. Reducing non-tariff barriers, especially within ASEAN, could unlock substantial economic gains, making trade more fluid and accessible.

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If countries start trading a lot more within the region, (that) will also create jobs. There's significant potential for intra-region trade, within Asia, within ASEAN (Association of Southeast Asian Nations), and within South Asia.

The IMF's call for greater regional trade comes at a critical juncture, with Asia facing heightened vulnerability due to energy supply disruptions linked to ongoing global conflicts. The region sources a substantial portion of its crude oil from the Middle East, much of which passes through the Strait of Hormuz. This dependence translates to a significant portion of Asia's GDP being tied to energy imports, making it particularly susceptible to price hikes and supply shocks. The IMF warns that prolonged conflict could lead to a cumulative drop in Asia's growth and a significant rise in inflation, narrowing the policy options for governments across the continent. Therefore, strengthening regional economic ties is not just a matter of growth, but of crucial economic security.

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Notably for ASEAN countries, which are open economies, they will benefit a lot if (they) reduce non-tariff barriers. There is huge room for an uptick in growth.