Economic conditions in Asia-Pacific remain stable, supported by stronger-than-expected performances in some of the region’s larger economies and steady performance in most smaller ones. Deepening inequalities and domestic financial vulnerabilities in some economies, along with a high number of climate-change induced natural disasters in the region, however, may overshadow the outlook for economic growth and the prospects for sustainable development, according to the year-end update of the flagship report Economic and Social Survey for Asia and the Pacific 2017 released by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
The report highlights that domestic private consumption remains the main driver of economic growth, facilitated by relatively low inflation, low interest rates and robust consumer confidence. Stronger exports also contributed to the recent uptick in economic growth. The average GDP of developing economies in the region is expected to grow by 5.4 percent in 2017.
The report however cautions that while the regional economic outlook for 2018 is broadly stable, underpinned by growing domestic and intraregional demand, private investment remains weak in most countries, partly as a result of overcapacity and debt overhang in the corporate and banking sectors of some major economies. To achieve a stable and sustained economic growth momentum, higher wages supported by productivity gains and revival of private investment will be needed, the report highlights.
Launching the year-end update in Bangkok, Dr Shamshad Akhtar, United Nations Under-Secretary-General and ESCAP Executive Secretary said, “Countries across the region, such as China, India and Uzbekistan, are making challenging economic reforms, which may weigh on near-term performance despite their potential long-term benefits. Countries will need to be increasingly vigilant of emerging risks such as trade protectionism, a tightening in global financial conditions, geopolitical tensions and recurring natural disasters, all of which could undermine the hard-won economic gains.”
The Executive Secretary underscored that as the year comes to a close, countries should make the most out of current stable economic conditions to make important headways towards socially-inclusive and environmentally sustainable economies. “Unless economic growth is accompanied by an expansion of decent jobs and strengthening of social safety nets, the region will continue to see a rise in inequality and little progress in eliminating poverty. Without concerted efforts, economic growth will continue to come at a significant, and often irreversible, environmental cost,” said Dr. Akhtar.
In this regard, the Update recommends a raft of strategic interventions that can improve the prospect for achieving the 2030 Agenda for Sustainable Development, emphasizing that good governance should underpin such policies and reform. ‘Good governance can prove vital for governments to successfully lead the structural reforms that will enhance the supply side of their economies and transform them for the implementation of the 2030 Agenda,” the report notes.
It further argues that fiscal policy should play an instrumental role in lifting demand, ‘crowding in’ private investment and supporting development priorities, such as improving social protection and stemming environmental degradation. “Currently, fiscal sustainability is not a concern in most countries. Nevertheless, to fill the wide financing gap – difference between public investments required to effectively pursue the 2030 Agenda and the prevailing trends – fiscal space must be enlarged, including through innovative ways to mobilize fiscal resources, broaden the participation of the private sector and enhance deepening of capital markets, while adopting redistributive expenditure policies, ” the report said.
Additionally, the report explains that by effectively leveraging technology, countries can improve governance and fiscal management. “For instance, through the use of technology, governments can improve tax administration and compliance and the implementation of direct benefit transfers while improving public expenditure efficiency,” the report added.