Speech

Asia’s Next Growth Frontier

March 4, 2025

(As Prepared for Delivery)

I would like to thank Finance Minister Kato for welcoming us today and want to express my gratitude to Governor Ueda for joining. I’m very sorry I can’t be with you in person. But thankfully technology allows me to join you virtually.

Those who have been to Tokyo’s Skytree know that it has the best views of the city. And like so much in Japan, it’s an engineering masterpiece. Gazing across Tokyo’s skyline, it’s hard to imagine just how much the city—and the country—has changed in the 80 years since the Bretton Woods Institutions were established.

After World War II, Japan invested heavily in infrastructure and manufacturing and introduced sweeping reforms. These set the country on a path to becoming an economic powerhouse.

Inspired by Japan’s success, other countries in Asia followed suit. Today, the region contributes over 60 percent of global growth, and is home to some of the world’s largest, most innovative companies.

Of course, Asia is a very diverse continent, with a mix of advanced economies, emerging and frontier markets, and small island states. Demographics and income levels vary too.

But across the region, openness and deepening economic ties have been crucial to countries’ success.

The world is changing, however. Many countries face weaker growth prospects and are saddled with high public debt. The COVID-19 pandemic and recent geopolitical developments have brought into focus the importance of security of supplies. Trade is no longer the engine of global growth it used to be. And we are in the midst of massive transformations, from rapid advances in AI to changing patterns of capital flows and trade. 

Against this background, governments worldwide are shifting their priorities. The new US administration is rapidly reshaping its policies on trade, taxation, public spending, deregulation, and digital assets. And other governments are also recalibrating their approaches and adjusting their policies.

The future of growth

How should countries in Asia adapt? Let me highlight three opportunities.

First, the shift toward services-led growth. While trade in goods has flattened, service flows are surging. In fact, services have already drawn about half of the region’s workers, up from just 22 percent in 1990.

Economists have traditionally thought of services as less productive than manufacturing. Our research suggests otherwise. Asia’s labor productivity in financial services is four times higher than in manufacturing, and twice as high in business services.

Second, digitalization and AI. The demand for digital products and services in the region has accelerated quickly and is on track to continue growing faster than the region’s GDP. Japan’s Rakuten, China’s Alibaba Group, and Indonesia’s GoTo Group now rival e-commerce giants Amazon and Walmart.

In AI development, Japan and China are racing ahead, followed closely by South Korea and Singapore. This could be an important boost for productivity. In Singapore, for example, an estimated 40 percent of jobs could be made more productive by AI. The country has several digital economy agreements now in place, enabling digital companies in the region to connect and share data more easily.

That brings me to my third point: greaterregional cooperation andtrade. On the surface, it might look as if the world is retreating from integration. But regionally, countries are leaning in.

Over the past four decades, intra-regional trade in Asia has increased by 43 percent. Today, more than half of Asian trade is regional.

The trend is the same for foreign direct investment. FDI from Asian countries to Japan, for example has nearly doubled over the past decade, as market opportunities in Japan’s technology sector grow.

Together, the shift toward services, digitalization and AI, and greater regional integration can lift growth. But to harness these opportunities, the region will need to carefully navigate domestic developments and global changes.

The IMF’s role

That is where the IMF comes in. We strive to be trusted partners to our member countries, provide country-specific advice and safeguard the stability of the global economy. Our work spans economic analysis, policy advice, financing and capacity development.

And as the world economy has changed, we too have evolved. From managing fixed exchange rates in the 1970s, to active surveillance of countries' economic and financial policies and more systematic coverage of spillovers.

More recently, our thinking on capital flow management and foreign exchange interventions has changed, and we’ve upgraded our lending toolkit to include more flexible instruments tailored to emerging market economies.

Thanks in large part to Japan’s support, we are also offering more support to low-income countries, especially in capacity development, and a stronger presence around the world through our regional technical assistance centers.

We are grateful to Japan for the deep engagement in thinking about the future of the Fund. Today’s discussions are an important part of that. 

My colleagues and I are keenly interested in ideas and reflections on:

• how we can best support our members, especially the most vulnerable among them, to grow and build economic resilience;
• how to tailor more of our advice to support countries’ efforts to deepen regional collaboration, by thinking through our strategic engagement with groups like the ASEAN, the Pacific Island countries, as well as medium sized and larger economies; and
• how to strengthen the global financial safety net. We're assessing how IMF facilities can be further improved to support resilience in our member countries. And we are working closely with regional arrangements to enhance crisis prevention and response capabilities.

We know from experience that reforms are hard, but we also know they can steer countries towards stronger and durable growth and can achieve a more stable and prosperous global economy.

You can count on the IMF in this journey.

Deputy Managing Director Nigel Clarke and the rest of our team are excited to be part of today’s productive discussion. I look forward to the outcome.

Thank you.