'Domestic structural restraints' major barrier: annual Escap report
Asia-Pacific developing economies are experiencing yet another year of subdued growth, the United Nations said this week, calling for quick action on the removal of domestic structural constraints and the unlocking of fiscal space to help stimulate growth and support social development.
Structural constraints, such as infrastructure and development deficits, along with external challenges, are keeping the region from realising its economic potential, according to the “Economic and Social Survey of Asia and the Pacific”, the annual flagship publication of the UN Economic and Social Commission for Asia and the Pacific (Escap).
Developing countries in the region are forecast to grow at an average of 5.8 per cent in 2014, up from 5.6 per cent last year. This marks the third successive year of growth below 6 per cent. By comparison, growth averaged 9.5 per cent in the pre-crisis years of 2005-2007 and over 7 per cent in 2010 and 2011.
“The constrained domestic growth prospects of the region have underlined the importance of productive countercyclical public spending to support inclusive growth and sustainable development,” said Shamshad Akhtar, UN under-secretary-general and Escap executive secretary.
Gross domestic product in trade-driven East and Northeast Asia is expected to grow moderately at 4.1 per cent in 2014 against 4.2 per cent last year. Subdued global commodities demand is forecast to lower North and Central Asian growth to 1.3 per cent from 2.1 per cent in 2013.
Southeast Asia’s economy is set to grow more slowly, at 4.6 per cent, down from 4.9 per cent last year.
Despite geographical challenges, Pacific island developing economies are projected to grow at 4.9 per cent against 4.0 per cent last year. Growth in South and Southwest Asia is forecast at 4.7 per cent in 2014 from 3.9 per cent last year.
Akhtar emphasised that developing economies in Asia and the Pacific were experiencing subdued growth for different reasons. Launching “Survey 2014” in Bangkok, Akhtar stressed the urgency for bridging gaps in infrastructure and development in the region and addressing environmental degradation in order to promote higher, well-balanced and sustainable growth. Another priority for ensuring the sustainability of growth is to address climate change better through improved climate finance.
Escap estimates more than 60 per cent of Asia-Pacific people lack social protection coverage. Some 63.1 per cent of women and 56 per cent of men in the region faced employment vulnerabilities in 2013 and youth unemployment is three times the adult rate.
Asia-Pacific countries are coping with the fallout of monetary and trade policies in the developed world. The withdrawal of quantitative easing by the United States has jolted regional financial markets. “Survey 2014” estimates further financial-market volatility, expected from the continued normalisation of monetary policy in the US, could cut annual growth by 0.7-0.9 per cent in Thailand, India, Indonesia, Malaysia, Russia, and Turkey. Trade-restrictive measures in advanced economies outside the region may also have deprived Asia-Pacific developing countries of $255 billion in goods-export opportunities between 2009 and 2013, translating into a cumulative decline of more than 1.6 per cent of regional economic output, the Escap analysis reveals.
The growing disparity in incomes and access to social opportunities is a dampener on economic dynamism in Asia-Pacific developing countries, says the Escap report. The estimates indicate that the poorest 20 per cent of people in 40 Asia-Pacific countries account for less than 10 per cent of national income. The net wealth of about 49,000 ultra-wealthy individuals in the region – with at least $30 million in assets – is 17 times the combined GDP of Asia-Pacific least developed countries.