Slow income growth in developed economies likely to cause fall in Asian export growth…

Excerpt ADBI working paper: Can Asia Sustain an Export-Led Growth Strategy in the Aftermath of the Global Crisis? An Empirical Exploration. 

“Since pre-crisis global imbalances largely involved industrial country trade deficits, a shrinking of such imbalances will almost certainly require a decline in these deficits. In principle such deficits could decline through greater industrialized-country export growth without a fall in import growth. However, add to this the near certainty that slow industrialized-country income growth will cause demand from these countries to grow at a slower rate and we get the implication that Asian exports to industrialized countries are likely to decelerate which, in light of our main finding, is a cause for concern. Put differently, the fact that subsidies for domestic tradable production and removal of penalties on domestic consumption may not be good substitutes for exports to industrialized countries magnifies the challenges facing sustained Asian growth in the coming years”

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