Bank warns that Asian growth could collapse
Global woes and natural disasters are constant threats
Threats to economic stability will hit poor the hardest, ADB says
- Joe Torres, Manila
- July 1, 2013
Turmoil on the world’s financial markets and natural disasters that have struck Asia in recent years threaten to worsen the impact of prolonged weakness on the global economy, the Asian Development Bank (ADB) says in its latest report.
The Manila-based bank's Annual Evaluation Review 2013, released today, highlights the growing risks and vulnerabilities that endanger the region’s “hard-won socio-economic gains and success” in reducing poverty.
Vinod Thomas, director-general of the bank’s Independent Evaluation Department, said Asia leads the world in the pace of growth, “but governments need to be more conscious of the risks facing the region from economic, social, and environmental factors.”
He said “emerging vulnerabilities” point to a longer road than previously expected in eradicating extreme poverty unless action is stepped up.
The report noted that tackling these vulnerabilities will require “greater effort” by governments and development agencies to provide effective early warnings of impending economic and financial shocks and adequate social safety nets.
The report noted the marked increase in floods, storms, and drought worldwide, especially in Asia and the Pacific, as another such “vulnerability.”
“The uncertain outlook seems to be sapping the commitment of governments to finding novel solutions,” said Walter Kolkma, the report’s main author and a director of the Independent Evaluation Department.
He said the vulnerabilities need to be confronted because these will only deflate economic growth while hitting the poor hardest.
He said “evaluative evidence” supports the effectiveness of governments transferring resources directly to the poor to broaden access to economic opportunities.
“Social safety nets have been shown to be effective in reducing poverty when cash transfers are conditioned on the poor sending their children to school and using health services,” the report noted.
It cited the Philippine government’s cash transfer program for the poor, which is conditional on beneficiary households meeting health and education targets.
The ADB report said the ambitious program is showing promising early results, reaching nearly four million households by March 2013 and targeting 5.2 million by 2015.
The report said microfinance programs also offer the potential for reducing poverty and promoting inclusive growth, especially if linked to wider banking services and if combined with social protection.
The bank noted, however, that access to financial services by the poor remains a struggle.
A survey of six countries in the region showed that fewer than nine percent of microfinance borrowers lived on below $1.25 a day and fewer than 22 percent on $2 a day.
The report also noted that in the area of natural disasters, greater preparedness and better prevention works, such as river dikes and storm drains, are another solution that needs to be scaled up.
Despite crippling floods hitting Beijing, Jakarta, and Manila in recent years, disaster preparedness in most of Asia’s developing countries remains low.
Thomas said that systematic disaster risk reduction measures still do not feature sufficiently in national development plans.
“As with stress tests against financial calamities, it’s high time we did stress tests against natural hazards,” Thomas said.
The report noted that catastrophic floods and landslides in the north Indian state of Uttarakhand, which may have claimed over 1,000 lives, are an “ominous start to the monsoon season.”