In this supportive international environment, the euro area experienced a brilliant first quarter of 2011, emphasizing the robustness of the recovery. GDP increased by 0.8% over the quarter but as fast as 1.5% in Germany and 1.0% in France. All euro area countries, except Portugal, enjoyed positive growth rates. These developments no longer reflect solely the economic policy stimulus and the inventory cycle; they testify to a broad-based recovery, with a self-sustained private sector dynamics. One remarkable development of this first quarter is that French and German growth has been mainly driven by private domestic demand and, in particular, business investment. In France, it grew at a 1.9% quarterly rate, posting a fourth consecutive quarter of strong growth. The pace of recovery may slow in the coming quarters. Business climate indices, such as the Purchasing Managers Index, the Economic Sentiment Indicator or Germany’s IFO, have peaked at high levels. Beyond these observations, the crisis may have left scars on our economies. Potential growth may have been affected. The balance sheet repair process, involving both public and private agents, may also weigh on growth in the medium term. Still, prospects are encouraging. The OECD, which recently issued its latest forecasts, has just raised its growth forecast for the euro area to 2.0% in 2011 and 2012. All in all, we have strong reasons to believe that we successfully exited the economic crisis. There are increasing signs that the recovery is now well on track.
Factors like certainty in government’s sector development plan, clarity in publicprivate partnership (PPP) framework, conducive legal, regulatory and institutional environment, and capacity to develop and implement projects are key to attracting private sector investors. ADB has an important role to play in capacity building, and through its interventions, catalyse reforms and assist governments to develop an environment conducive for private sector investment. Given the high degree of perceived risk of long-term infrastructure projects, public sector support is often needed to catalyse private sector investment. Provision of credit enhancements and guarantees as well as PPP are common modalities of public sector support, and more work should be done to find new and effective ways to catalyse private sector investments. We are glad to see ADB’s expanded efforts in mobilising private sector  BIS central bankers’ speeches  1  investment under Strategy 2020. With the support of ADB, the ASEAN Infrastructure Fund (AIF) established by ASEAN is expected to help mobilise private capital as well as the region’s foreign exchange reserves for financing infrastructure projects in the ASEAN economies. While the AIF is newly set up and more time is needed to observe the effectiveness of this model, the AIF represents a meaningful attempt by regional governments to cooperate and find new ways to mobilise public and private savings of the region to finance Asia’s own infrastructure needs. We encourage further efforts in this regard, and ADB, with its expertise and resources, is best placed to support such efforts.