Is it Asia's turn for austerity?

The U.S. has gone through it, so have Europe and Japan. Now it is Asia's turn to endure a period of austerity, one economist tells CNBC.

Asia, often regarded as one of the world's key growth engines, has seen its economic conditions deteriorate in recent years and must now implement reforms to get back on track, Rob Subbaraman, chief economist for Asia ex-Japan at Nomura said on Wednesday.

(Read more: Ten trends that will shape Asia in 2014: Carnegie )

"This year for Asia needs to be one of austerity," he told CNBC Asia's "Squawk Box." "The U.S. has had it, Europe's had it, Japan's had it, it's Asia's turn. Asia needs to basically raise the cost of capital and implement supply-side reforms which will be painful in the short run."

India and Indonesia came under fire in the second half of last year for holding large current-account deficits and being slow to implement structural reforms.

Some of the Asian economic data at the start of the New Year meanwhile has proven disappointing.

Taiwan exports fell unexpectedly last month, Malaysia's November export data fell well short of expectations and manufacturing and service sector activity in powerhouse China slowed in December.

(Read more: China December HSBC services PMI falls to lowest in over 2 years )

There's also been renewed focus on the risks that high local government debt levels pose to China's economy.

Blessing in disguise

In the wake of the global financial crisis, the U.S. and Europe suffered a recession. Asia's economy held up relatively well, supported in part by ample liquidity following quantitative easing by the U.S. Federal Reserve and robust growth in China.

(Read more: What cuts? US austerity 'tougher than in Europe' )

Subbaraman said that in some ways talk of the Federal Reserve unwinding its monetary stimulus has been a blessing in disguise for Asia by forcing governments to address pressing economic problems.

India and Indonesia have taken steps in recent months to bring down their current account deficits and restore investor confidence. Indonesia last week reported a surprise trade surplus of $780 million in November versus market expectations for a deficit of $70 million.

(Read more: Indonesia surprises with a sizeable November trade surplus )

"The current account improvement we expect appears to have started already. The Indian current account deficit has narrowed sharply, with measures to curtail gold imports playing an important role," analysts at Goldman Sachs said in a note on Friday. "Other things equal, better current account performance should mean less pressure on local rates and currencies from rising developed-market interest rates, though this will clearly remain a concern in 2014."

Subbaraman added that developments such as Malaysia starting to unwind government subsides, China implementing structural reforms were all positive signs.

"In a way Fed tapering is a blessing in disguise for Asia because it's forcing investor discipline on policy makers now to do the right thing," he said. "Investors are focused on risks in emerging markets and if they don't do austerity, the risk is we wait till 2015, debt bubbles get bigger, then when the Fed starts raising rates, it will be a worse."

- By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC