Istanbul - Asia may be leading the global economic recovery, but it could face a period of slower growth and rising unemployment in coming years as it transitions from exports to domestic demand, the International Monetary Fund (IMF) said Sunday. Governments will have to prop up their economies for much longer than in past economic crises if they wish to avoid another downturn in 2010 or 2011, the IMF said.
A sluggish recovery expected in the United States and Europe means Asia will not be able to rely on a pickup in exports as it did in the past, said Anoop Singh, director of the IMF's Asia and Pacific Department.
"As a result, the impetus for Asia will need to come from within," Singh said in Istanbul, where the IMF and World Bank are holding their annual meetings.
The IMF earlier this week forecast that Asia will grow 2.8 per cent this year and 5.8 per cent in 2010 - much better than most other parts of the world that suffered deep recessions. About half of the growth is due to massive public spending measures.
Yet Singh said the coming transition will be inevitably painful: Asia will still be forced to rely on exports in the coming years, while the mammoth shift needed towards domestic demand will place a burden on companies in the region.
"This fundamental shift in the drivers of demand - from the manufacturing of exports towards domestic sources and services - has the potential to lower productivity and employment," Singh said.
Asian exports to the United States and Europe plunged some 30 per cent last year as advanced economies battled through their worst recession in seven decades.
The crisis has woken up many Asian governments to the fact that they will have to rely more on domestic demand to drive their economies in future. US President Barack Obama has warned that the US consumer can no longer be relied on to fuel growth around the world.
