Factors underlying Asia’s Growth Prospects First, domestic demand led growth Domestic demand in the regional economies is becoming an increasingly important driver of growth that has considerable potential to contribute further in sustaining growth prospects for the Asian region. The stronger domestic demand has also been reflected in the rising intra-regional demand for goods and services, thus providing a positive mutually-reinforcing effect for the region. While externally driven growth will continue to be important, the increased focus on strengthening domestic demand will reduce vulnerability to external developments. Second, the role of private consumption Given the focus on domestic demand to harness a more self-sustained and balanced economic growth, an important catalyst is the role played by private consumption. Private consumption is well positioned to further build the capacity of domestic demand in the region. The contribution of consumption to economic growth in regional economies has increased over time, supported by the expansion in per capita income in the region, which has increased by 4% per annum during the period 2000-2002. Consumption has also been supported by the fiscal and monetary stimulus that has been implemented in the region. This has enhanced incomes and strong credit expansion for household spending including for the purchase of housing. The tradition of high savings ranging to between 20% to 45% of GNP allows scope for encouraging a higher rate of consumption without undermining its sustainability. Household debt levels are also generally low. In addition, the household sector generally has a good track record in servicing their debt.

These surveys provide significant transparency into the finances of those entities, which is invaluable for policymakers and citizens wishing to understand, monitor and exert control and discipline over the fiscal policies of their governments. They may also serve the purpose of increasing investor understanding of how the Commonwealth’s finances compare to other governments. New York City’s experience in the 1970s shows the value of better financial reporting. Prior to the City’s fiscal crisis in 1975 through 1977, New York had relatively poor financial reporting practices. As part of its recovery from that crisis, and a condition of accessing credit, the City’s reporting improved dramatically and has since won several awards. Along with those improvements, the City’s access to credit markets steadily improved. Economic research indicates that more transparent budgets are associated with lower public sector funding costs. A fourth step would be to look for ways to strengthen the performance of public corporations. A major difference between Puerto Rico’s balance sheet and those of the states is the presence of large, heavily indebted, corporate-like entities that continue to lose money and increase borrowing. For any financial reform agenda to be successful, it must confront this issue head on. Key elements of a successful reform strategy might include strengthening the public corporations’ financial standing and controlling the future flow of liabilities. BIS central bankers’ speeches  5  Puerto Rico could also seek out the opportunity to benefit from outside management expertise, including the wide experiences of U.S. mainland states.