While most economies were able to recover in just over a year, in the decade that followed, wide ranging financial reforms were implemented. In addition, the development of the financial markets and the financial infrastructure were aggressively pursued to strengthen the capacity of the financial system. The legal framework and the regulatory and supervisory framework of the financial sector were also strengthened. Several important lessons from the crisis were also addressed, in particular, avoiding the excessive accumulation of debt whether by the household, corporate, financial sector or the public sector. Measures were taken to avoid the build-up of such  BIS Review 94/2010  1  leverage and excesses largely through prudential regulation. In addition, buffers were built during the good times. These reforms have yielded tremendous payoffs for Asia. With more developed financial markets and with better capitalised banking institutions equipped with strengthened risk management and governance practices, Asia did not experience any disruptions in financial intermediation during the 2008–2009 global financial crisis. The continued access to financing has in fact been important in sustaining domestic demand and in supporting Asia’s rebound from the recent global crisis. The International Monetary Fund estimates that the emerging economies in Asia will grow by an average annual rate of 8.6% in the next five years. Asia is therefore very much part of the global shift that is taking place in which the economic power in the world will become increasingly more dispersed with the emergence of several growth centres in the global economy.

Should Asia continue to grow by an average annual rate of 7% over the next ten years, it is estimated that Asia’s share of the global GDP will increase to 40%. Let me further elaborate on these two developments, namely the strengthening of domestic demand in Asia and the intensification of regional economic and financial integration, that are mutually reinforcing in sustaining Asia’s economic growth prospects. A more recent phenomenon supporting this trend is the strengthening of regional financial cooperation not only to preserve regional financial stability but also to enhance the prospects of the region. Strengthening domestic demand The strengthening of domestic demand is part of the structural changes taking place in Asia to diversify its sources of growth. Growth in most of the Asian economies was previously export-led. While several measures have been taken to promote domestic demand, the favourable demographic structure, the low levels of unemployment, the relatively low level of household debt and the policy flexibility to implement supporting monetary and fiscal policies have contributed to higher consumption. Other measures initiated are the social safety nets in the form of schemes and programmes for unemployment benefits, healthcare, education and retirement that have been put in place to reduce the need for high savings. The consequent increase in consumption demand has not only resulted in a significant expansion of the retail trade sector but Asia is also increasingly becoming an important consumer in the global economy.