UN Says Stable Economic Conditions Provide Opportunity
Stable economic conditions in the second half of 2016 provide an opportunity to internalize the economic, social, environmental and governance dimensions of sustainable development in a comprehensive manner, according to the year-end update of the flagship report Economic and Social Survey for Asia and the Pacific 2016 of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
The report argues that progressive tax policies, together with better and effective economic governance, can help economies make progress on inclusiveness and move decisively towards sustainable development.
Resilient domestic demand and policy support have resulted in the region’s developing economies growing at a steady pace of just below 5 percent despite sluggish global economy and weak trade growth, according to the report. The region’s high and steady economic growth, led by China and India, has been an anchor of stability for the global economy, resulting in a broadly positive outlook for developing countries of Asia and the Pacific for 2017.
Launching the year-end update of the Survey 2016 in Bangkok, Dr. Shamshad Akhtar, United Nations Under-Secretary-General and ESCAP Executive Secretary, emphasized that despite the overall positive outlook, the potential impact of some risks should not be underestimated.
“Bouts of financial volatility can re-emerge due to external policy uncertainties in major economies, including those related to the ‘Brexit’ negotiations in Europe and the new administration in the United States of America, as well as vulnerabilities on the domestic front, such as those on corporate and bank balance sheets,” said Dr. Akhtar.
“External demand is likely to remain weak, with trade protectionist measures and sentiments, which are already on the rise, resulting in prolonged weakness in global trade and a drag on productivity growth,” she added.
The report notes that output expansion in recent years from globalization and technology has not been translated into commensurate increases in decent jobs in a number of countries, contributing to rising income inequality. The report also underscores that as the region undergoes further structural transformation, efforts to lift productivity and innovation should be matched by measures to enhance worker skills and social protection.
Additionally, the report recommends that fiscal policy can and should play a proactive role in supporting domestic demand and meeting long-term development priorities. Public infrastructure outlays are deemed particularly effective in addressing structural bottlenecks in the current environment of weak external demand, weak private investment, low borrowing costs and benign inflationary pressures.
The population-weighted Gini coefficient in the region, based on household income estimates, has increased by 11 points, from 37 to 48, between 1990 and 2014, an increase of almost 30 per cent in less than three decades.
Elaborating the importance of promoting inclusiveness for sustainable development, Dr. Akhtar emphasized that “Progressive tax policies can be particularly effective in nurturing a more balanced society and reducing extreme inequalities.”
The Asia-Pacific region as a whole has one of the world’s lowest tax revenues levels, at 17.6 per cent of GDP, with a relatively low share of direct taxes in the general tax mix.
Better economic governance, as reflected in the effectiveness and integrity of public institutions, is a fundamental element in undertaking progressive tax reforms, managing structural transformations and moving towards sustainable development.
The report concludes with an observation that effective economic governance can go a long way in enhancing investment, in promoting productivity and in accelerating poverty reduction and mitigating inequalities.
The role of better and more effective governance in improving development outcomes, especially through public resource management and financial markets, will be explored in detail in the forthcoming Economic and Social Survey for Asia and the Pacific 2017, expected to be released in April next
year.