Zeti Akhtar Aziz: Asia in the world – sustaining the region’s transformative momentum Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Wharton Global Alumni Forum: “Asia in the world – sustaining the region’s transformative momentum”, Jakarta, 22 June 2012. *  *  *  The global economy is experiencing a period of profound change. Asia is very much at the centre of this global change. Asia’s changing role in the global economy has not only been in terms of its growing size, but also in terms of its influence in global economic and financial developments. The issue before us is whether Asia will continue its transformative momentum over the medium to longer term, to become an increasingly important source of global growth and stability. It is my very great honour and pleasure to be here in Jakarta to speak at this Wharton Global Alumni Forum. Exactly a decade ago, I was actually invited to speak on the same subject on the state and future of Asia at the Wharton School in Philadelphia. Then, having just emerged from the Asian financial crisis, the region was again being challenged by a series of economic and financial shocks, in particular, the bursting of the dot com bubble in the United States in the year 2000. Observers had questioned the sustainability of the region’s medium and longer term growth prospects.
The fact is that there is often not much resource slack in the economy also makes it hard to discern a clear empirical relationship. Unfortunately, in this episode, we don't need a precise estimate of slack to be highly confident that the level of slack in the labor market is at or above the record of the post-World War II period. Although the headline unemployment rate of 9.8 percent is about one percentage point below its level at the end of the 1981-82 recession, other, more indicative measures paint a bleaker picture. For example, the prime age male unemployment rate is at a record high, by a significant margin. The labor market data released last Friday showed the September value at 10.4 percent, an increase of 6.5 percentage points from the start of the recession. In contrast, in the 1981-82 recession the prime age male unemployment rate peaked at 9.3 percent, rising by 4.2 percentage points from the start of that recession. Over the post-World War II period as a whole, it was only in the wake of the 1981-82 and 1990-91 recessions that the prime age male unemployment rate remained above 6 percent for more than just a few months. In addition, during all post-war expansions, the prime age male unemployment rate has fallen below 5 percent, even during the short expansion of 1980-81. Currently, even under very optimistic forecasts for the economy, it appears very unlikely that the prime age male unemployment rate will dip below 6 percent before 2011.