BEFORE Asian countries, including the Philippines, start worrying about increasing debt and inflation, they must first focus on recovering from the global economic crisis, according to the Asian Development Bank’s (ADB) new chief economist.

While the threats of increasing debt and inflation are all too real, Dr. Jong-Wha Lee said it is important for Asian countries to rebalance growth and recover from the worst recession since World War II.

Dr. Lee said countries can do this by avoiding efforts that exploit export-oriented growth strategies, which is one of the reasons many Asian economies, including China, Singapore and Japan, were hit so hard by the crisis.

“It’s not the time [to] actually implement an exit strategy. It is [true that] some countries need to worry about the accumulation of fiscal debt and worry about the threat of inflation, which may come from increased
commodity prices. There is a need to prepare for future risks but not to actually implement (an) exit strategy,” Dr. Lee said at a briefing with select journalists at the ADB on Thursday.

Dr. Lee said focusing on the crisis is important mainly because of its impact on poverty and other development issues. He said that if the crisis did not happen, around 60 million Asians living under $1.25 per day would have been lifted out of poverty in 2009.

This number could have risen greatly in 2010 if high growth of around 8 percent to 9 percent was sustained. Lee said around 100 million Asians would have been lifted out of poverty.

Dr. Lee said the extent of the crisis and its possible effect on economic growth in the next few months are already being studied by the ADB Economics and Research Department, now in the thick of preparing the Asian Development Outlook (ADO) Update.

From what the current trends are, Dr. Lee said the global economic situation only got worse since they released the ADO 2009 last March.

He said that to date, the ADB sees economic growth in the United States hitting -3 percent in 2009 while economic growth in Europe will be within -4.0 to -4.5 percent. Dr. Lee said the US seems to be slightly recovering while Europe was not doing as well.

He sees Asia likely hitting a growth of 3.4 percent in 2009, significantly lower than the 6.3-percent growth it posted in 2008 but relatively better than industrialized regions of the world.

Revisions may be forthcoming, particularly for the Philippines, he added. In the ADO 2009, the ADB projected that the country would grow 2.5 percent this year. However, a downward revision is possible given the very thin 0.4-percent growth posted in the first quarter and consistent negative export growth.

“Economic growth seems to have slowed and is bottoming out. But, how long it will stay at the bottom cannot be determined at this point. We can’t rule out the possibility of a revision,” Dr. Lee said.

What is going for the Philippines right now, Dr. Lee said, is the fact that overseas Filipino worker remittances continue to contribute significantly to the economy, albeit at a slower pace. Remittance growth in 2009 has not been as high as in previous years when it reached 10 to 20 percent growth, he noted.

Another reason for the country’s slight resilience is that it is not that dependent on exports, especially when compared to China, Singapore and Japan.

“The Philippines is, relatively speaking, less dependent on export demand, that’s why the impact (of the crisis) is less compared to other countries. Relatively speaking, the Philippines had less severe shock. If you ask me whether the Philippines can recover earlier or later, it depends on how you define recovery,” Dr. Lee said.

“Whether the Philippines should worry about inflation and debt, this issue, I said, (are) long-term issues because we are worried about recovery. Clearly, this is a priority at this point but then, as I said, eventually, the issue will become how to have sustained long-term growth; then this inflation and debt issue will come,” he explained.

Dr. Lee has over 20 years of professional experience as an economist and an academic. He worked as Economist at the International Monetary Fund and taught at Harvard University as a Visiting Professor.

He also served as a consultant to the ADB, the Harvard Institute for International Development, the Inter-American Development Bank, the International Monetary Fund, the United Nations Development Programme, and the World Bank. He also served as a member of the National Economic Advisory Council in the Republic of Korea.

Prior to joining ADB, Dr. Lee was the Director of the International Center for Korean Studies and a Professor of Economics at Korea University. He has published numerous books and reviewed journal articles in English and Korean, especially on topics relating to human capital, growth, financial crisis, and economic integration.