Here's the good news. By 2050, Asia could account for more than 50% of the world economy, with regional GDP around $174 trillion. This is not just in gross GDP terms but should also include a substantial rise in per capita incomes, reaching $40,800 on average. In other words, there will be no more poor countries in Asia, bar one or two isolated losers such as North Korea.

Here's the bad news. By 2050, Asia could remain stuck in a 'middle-income trap', not a failure but certainly an underperformer. Its aggregate GDP of $65 trillion keeps its share of the global economy closer to its current 28%. Per capita incomes stagnate around $20,600.

Such is the opportunity cost of failure, says Jayant Menon, lead economist at the Asia Development Bank's office for regional economic integration, speaking at a recent investor conference organized by AsianInvestor in Kuala Lumpur.

He says this long-term outlook will be determined, in part, by short term events and how well Asia emerges from the ongoing financial turmoil. Although this is a crisis of the West, it is highlighting structural weaknesses that could undermine the "Asian Century" if not properly addressed.

The ADB now forecasts that 2011 will have seen Asia ex-Japan grow by 7.5%, with 2012 slated for 7.2%. (Those figures are 4.4% and 5.4%, respectively, including Japan.) However those estimates depend on the severity of a recession in the West, the possibility of trade protectionism, a credit crunch, inflation (due to food and oil shortages) and destabilising capital flows. Overall, the ADB expects conditions to be difficult, but not traumatic: Asia remains on a growth path.

The region's vulnerability to a eurozone crisis includes both trade and financial linkages. Moreover, the ability for governments to respond is more limited than in 2009, and the sort of fiscal stimulus or loose credit policies are not likely to be as robust. Hong Kong, Singapore and Taiwan are most exposed to a Western crisis. The ADB reckons a full-blown recession in both the US and Europe would reduce average Asian GDP by 2-2.5% next year, but more trade-oriented economies would fare worse.

Menon is careful to note that, even in worst-case scenarios, the region is unlikely to suffer as much as it did in the aftermath of the 2008 crisis, at least as far as trade linkages are concerned. The ADB can't predict behavioural and other responses to financial volatility. Nonetheless, the ADB encourages central banks, finance ministries, regulators and the private sector to have a more frank discussion about the region's vulnerabilities. How Asian countries respond to this crisis is likely to influence their long-term path.

Fiscal responses are all very well, and the region has a financial safety net in the form of an Asean+3 (including China, Japan and Korea) liquidity support mechanism named after a summit held in Chiang Mai.

But there is little coordination, no agreement on how to implement rescue funds, and still no real action in many countries on things like improving infrastructure, boosting human capital, rebalancing away from export reliance, or enhancing social safety nets.

Menon says Asia faces a handful of "mega challenges". First is growing inequality, which threatens social cohesion. Governments that develop their financial system, make growth more inclusive, develop skilled and innovative workforces, and eliminate slums will be more likely to escape the middle-income trap that snares many emerging countries as they shift from catch-up, export models to more innovative, less corrupt societies.

Other mega challenges include unsustainable demands on limited natural resources; climate change, including water shortages; and the tricky geopolitics of managing "Asia's rise".

Menon says these are problems, but they are also opportunities. Those countries that weather the current downturn are best positioned to invest in areas such as education and to improve civil society, and ensure Asian communities realise their full potential over the next generation.