Bangkok, Thailand (BBN)-United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) to develop economies in the Asia-Pacific region continue to fare well in comparison to the rest of the world, but structural weaknesses constrain growth prospects.
ESCAP, emphasizing that more inclusive economic growth is key to ensuring sustainable prosperity for all, said in its latest regional macroeconomic outlook report released on Thursday.
According to the Economic and Social Survey of Asia and the Pacific 2015, ESCAP’s annual flagship publication, growth in the region’s developing nations will increase only slightly, to 5.9 per cent in 2015 from 5.8 per cent last year, with no significant change expected in 2016.
Inflation is also forecast to further decline and remain low, largely due to lower international oil prices, which have led to interest rate cuts in many economies of the region.
The growth potential of Asia-Pacific developing economies is being held back by infrastructure shortages and the excessive commodity dependence of some countries.
The fragile global economic recovery, and consequently subdued global trade, pose additional challenges.
Dr. Shamshad Akhtar, United Nations Under-Secretary-General and ESCAP Executive Secretary Akhtar emphasized the need to promote quality growth and shared prosperity in the region, calling on regional policymakers to integrate and mainstream inclusive growth by adopting a mixed set of measures to achieve better social and environmental outcomes, to enhance public welfare.
ESCAP has also introduced a new multidimensional Index of Inclusiveness providing guidance to Asia-Pacific economies.
Applying a core set of 15 indicators of the economic, social and environmental dimensions of development, the Index assigns equal weighting to each variable, to more comprehensively assess the degree of inclusive outcomes.
The Index also allows comparative scoring of the multidimensional aspects of inclusiveness across different time periods.
“Adopting ESCAP’s new multidimensional Index will assist policymakers to better review and monitor progress on inclusive growth,” Dr. Akhtar explained.
The sample of 16 regional economies assessed in terms of the Index showed overall progress at the national level, but that significant socioeconomic disparities within countries remain, for example across gender, rural and urban divides, and geographical regions.
Inclusiveness demands continued stability and sustainable growth.
In this context, the recent uneven trend and pattern of economic growth requires proactive economic policy stances and close vigilance.
Other findings of the Survey reveal mixed progress, with significant reductions in extreme poverty, accompanied by rising income inequality, particularly in urban areas of major developing countries, as well as slow growth in the availability of productive and decent employment.
Developing economies in Asia and the Pacific also need to make better progress in ensuring equality of opportunity for all, especially women and girls, by broadening access to quality education and adequate health care.
The Survey projects that China’s planned moderation will lower its growth to 7 per cent in 2015, from 7.4 per cent last year, which is expected to be partially offset by an acceleration of growth in India to 8.1 per cent, from 7.4 per cent last year. Indonesia is also forecast to see growth pick up to 5.6 per cent, from 5 per cent last year.
However, in the latter two countries, this outlook depends critically on solid and sustained domestic reforms.
Additionally, ESCAP highlights critical policy issues for subregions, including excessive dependence on natural resources and worker remittances for economic growth in North and Central Asia; as well as employment and climate-related challenges in Pacific island developing countries.
Macroeconomic imbalances and severe power shortages are key concerns in South and South-West Asia, along with weaknesses in infrastructure and skilled labour shortages in South-East Asia.
The recent earthquake in Nepal is a fresh reminder of how natural disasters can reverse economic and social gains, with massive loss of life and livelihoods.
The region will remain susceptible to a range of risks and uncertainties- among others, possible fresh bouts of financial market volatility, delays in addressing structural impediments, and political disruptions.
In this context, ESCAP urges stronger macroeconomic management, coupled with targeted macro-prudential policies to cope with volatility in capital flows expected from current and emerging monetary policy conditions in the advanced economies.
The ESCAP analysis also argues in favour of caution as far as the monetary policy stance of developing economies of the region is concerned.
One reason for this advice is the increase in volatility of oil prices on a rising trend since mid-March, with ESCAP predicting that $60-$70 per barrel is the likely floor to the oil price during 2015.
ESCAP also advocates promoting equality of opportunity and boosting decent job creation through the development of small and medium sized enterprises and rural industrialization, with the private sector taking on a critical role in making growth more inclusive.
“Without a vibrant and strong private sector, tackling poverty and rising levels of inequality and creating jobs will not be possible,” notes the Survey.
Public expenditures should be more development-oriented, particularly enhancing access to quality education and healthcare, as well as strengthening social safety nets to help break the vicious cycle of deprivation, which further intensifies poverty.
“To enhance well-being, countries need to go beyond just focusing on ‘inequality of income’ and instead promote ‘equality of opportunities’,” Dr. Akhtar explained.
The Executive Secretary also urged Asia-Pacific Governments to focus on domestic resource mobilization, making a series of recommendations for Governments to not only increase their own revenues but importantly to also better tap private sector resources for sustainable development- in particular for climate-friendly infrastructure and social financing.
“While traditional sources of finance such as tax revenues and official development assistance are important, in order to bridge the wide financing gap, efforts to deepen the region’s capital markets and engage the private sector must be intensified,” said Dr. Akhtar.