SINGAPORE (AP) -- Singapore's finance minister warned Asia to expect lower economic growth for years to come as a weakened U.S. consumer buys less of the region's exports.
Gross domestic product expansion in Asia will likely fall to an average 6.5 percent over the next few years from 9 percent during the 2002 to 2007 period, Finance Minister Tharman Shanmugaratnam said Tuesday in a speech.
"We have to accept that it will be a lower growth world," Tharman said. "There's no other way of resolving the problem of excessive household debts in the U.S."
Singapore, along with other export-dependent countries such as South Korea, Taiwan and Hong Kong, has been especially hard hit by the global recession and collapse in consumer demand from the U.S. and Europe. The government expects GDP to shrink up to 9 percent this year, the biggest contraction since splitting from Malaysia in 1965.
Tharman urged regional governments to develop social security and health insurance policies that would free Asian consumers to save less and spend more. He warned policymakers against throwing up trade barriers that would raise costs and undermine consumption.
"We can boost domestic demand, but stay inserted in the world economy and not give up on exports," Tharman said. "It's not a fundamental redirection of economic strategy, it's the unwinding of excesses.
Massive fiscal programs around the world, led by the U.S. and China, were necessary this year to stave off a more severe downturn, but many countries have high debt levels and can't continue to boost spending much longer, the minister said.
"It was done for one year, but there's limited scope going forward," Tharman said. "There are serious concerns about how much you can do in the short term without setting yourself up for future bad debts."
The U.S. will likely see average annual economic growth slow to between 2 percent and 2.5 percent over the medium-term from 3.5 percent during the last decade while Chinese growth will fall to 8 percent from 11 percent in the 2004 to 2007 period, the minister said.
"This is going to be a hard slog," Tharman said "It will mean a world of lower growth than what we have been used to and the reason goes back to the U.S. consumer."
