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Economic and Social Prospects of Asia and the Pacific: Fostering an Inclusive and Sustainable Future Dr. Nagesh Kumar Chief Economist United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) 23 May, 2013: Astana, Kazakhstan .
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Economic and Social Prospects of Asia and the Pacific: Fostering an Inclusive and Sustainable Future Dr. Nagesh Kumar Chief Economist United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) 23 May, 2013: Astana, Kazakhstan
Economic Outlook of Asia and the Pacific 2013 • Growth forecast for 2013 to increase slightly to 6% from 5.6% in 2012 • China to grow at 8%, up from 7.8% in 2012 • India to grow at 6.4%, up from 5% in 2012 • Russian Federation to grow at 3.6%, up from 3.4% in 2012 • Inflation likely to remain at 5.1% in 2013 • Risk of oil and food price increase • Subdued growth could be “new normal” • Yet Asia-Pacific region remains the fastest growing region in the world and anchors recovery 2
Diverse sub-regional outlook • North and Central Asia to grow at 4% in 2013 up from 3.9% in 2012 • Kazakhstan to grow at 6%, up from 5% in 2012 • Inflation likely to be 6.4% in 2013 compared to 5.4% IN 2012 • North and Central Asia more exposed to commodity-related risks • Development of infrastructure is key to accelerate growth especially for landlocked countries in North and Central Asia
Policy challenges: Continued global economic uncertainty • Fiscal crisis in the euro zone + Policy uncertainty in US Impact on Asia-Pacific • Decreased economic activity through the trade and finance channel • Estimated regional GDP loss of 3% since the onset of the global crisis five years ago - $870 billion • Loose monetary policies, quantitative easing (QE), of the developed world Impact on Asia-Pacific • Short-term capital flows volatility • Rapid short-term currency appreciation • Food and fuel price volatility Impact on Asia-Pacific • Poverty and inflation 4
Growing Economic insecurity • Decreased job growth, increased economic insecurity and vulnerabilities • High incidence of informal sector jobs • Nearly 1.1 billion of the region’s workforce remain trapped in low quality, more pervasive among women and youth than men • Youth employment information • Youth unemployment is forecast to edge slightly upwards in 2013 • 13.4% in South-East Asia and the Pacific, 10% in South Asia and 9.8% in East Asia • Low social security • Less than 2% of GDP in many countries 5
Growing inequality • Income inequality (Gini index) increased from 33.5 in the 1990s to 37.5 in the latest available year • Inequality-adjusted ‘real’ GDP per capita falls Sri Lanka: GDP per capita $4,555 to ‘real’ GDP per capita $2,323 (in 2005 PPP) Republic of Korea: GDP per capita $27,415 to ‘real’ GDP per capita $19,492. • Inequality reduces social development gains by over 20% Pakistan: Gains reduced by over 30% Russian Federation: Gains reduced by over 10% 6
Infrastructure deficits • Impediment to growth, especially in South Asia and the Pacific islands • LDCs of the region, such as Afghanistan, Cambodia and Myanmar have the largest infrastructure deficits • Power is the most critical bottleneck and then transportation • Economic cost of traffic congestion: Indonesia: 1.2% of GDP Thailand: 2.1% of GDP Republic of Korea: 2.6% of GDP • Financing requirement in the region • $600 billion to $800 billion per year 7
Unsustainable resource use • Asia-Pacific economy is consuming more resources to produce one dollar of GDP • Future growth of resource use in several countries holds significant implications for overall resource demand • Vulnerability to natural disasters • 42% of the global economic losses due to natural disasters • Disaster losses since 1980 have increased by 16 times in Asia while GDP per capita has grown by only 13 times 8
Need for rebalancing • The medium-term need for the region continues to be to redirect its growth drivers from extra-regional demand to intra-regional and domestic demand • Policies should be designed to: • Increase the inclusiveness of growth • Broadening social protection and providing quality public service delivery • Foster the development of the agricultural sector • Sustainable, knowledge-intensive “green revolution” • Support the “green economy” • Public-private finance and low-cost access to technology • Exploit the potential of regional economic integration 9
An inclusive and sustainable development agenda for Asia and the Pacific • A job guarantee programme • 100 days per year for participants • A universal pension for elderly • For all aged 65 or older • Benefits to all persons with disabilities • Ages of 15 and 65 • Increasing the share of public health expenditures • 5% of GDP by 2030 • Universal enrolment in primary and secondary education • Primary by 2020 and Secondary by 2030 • Energy access to all • Modern energy services by 2030 10
Investing in inclusive and sustainable development • Overall public expenditure and investment requirements to implement such a policy package vary across countries • Total investment needs of above package of policies 5% to 8% of GDP by 2030 • Public investment needed to deliver policies to sustain growth and promote inclusive and sustainable development • In the case of China, the cost of the package is projected to reach 3.3% of GDP in 2020 and 5.2% of GDP by 2030 • The cost of the package is projected to exceed 10% of GDP by 2030 only in Fiji (13%) and Bangladesh (22%) 11
Such an agenda is generally affordable • Most countries can self-finance without jeopardizing macro stability, by • broadening tax bases • By making tax regimes more progressive • tax administration more efficient • Creating new sources of revenue including taxes on capital flights • fighting corruption • reducing non-development expenditures • LDCs would need global support 12
Region is gradually moving towards such policies • Thailand has evolved universal health package and has now raised minimum wages • National rural jobs scheme in India • 48 million households provided employment in over 600 districts in 2012-13 • Inclusive finance in Bangladesh • 10 million new bank accounts for smallholder farmers • China’s economic rebalancing to make growth more inclusive; good for region and beyond 13
New development paradigmin Asia-Pacific • Investing in social and environment pillars fortifies economic pillar… • Leads to sustained, inclusive and equitable economic growth • Grow now, distribute + clean up later is not an option • Critical for sustaining region’s dynamism
Thank you Economic and Social Survey of Asia and the Pacific 2013 is downloadable on: www.unescap.org/Survey2013/