Press Conference to Launch ‘Economic and Social Survey

 

of Asia and the Pacific 2013’

 

Amid widening income inequalities and depleting natural resources, the Asia-Pacific region was facing subdued growth in 2013, according to a new report by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

The model of “grow first, distribute and clean up later” was no longer acceptable, Pingfan Hong, Chief of the Global Economic Monitoring Unit in the Department of Economic and Social Affairs, said at a Headquarters press conference to launch ESCAP’s 2013 report “Economic and Social Survey of Asia and the Pacific:  Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development”.  Accompanying Mr. Hong was Ingo Pitterle, Economic Affairs Officer in the Department’s Global Economic Monitoring Unit.

Mr. Hong said the Asia-Pacific region was at a “critical juncture” as the continuing impact of the Great Recession exposed weaknesses in its development model.  It was, therefore, essential that policies focus on inclusive and sustainable development as developing economies in the region were highly connected with major developed economies.  The survey estimates that since the onset of the global economic and financial crisis, uncertainty stemming from double-dip recession in the eurozone and United States economic policy had shaved 3 per cent off regional gross domestic product, or $870 billion in output.

Although global financial markets had seen improvements in terms of equity prices and risk premiums, the “real economy” lacked robust improvement, Mr. Hong pointed out.  Several European economies were in recession and not expected to see positive growth in 2013.  Japan had taken very bold policy actions in an attempt to lift its economy from protracted deflation, but the results remained uncertain.  Meanwhile, the growth deceleration seen during 2012 in a number of large developing countries, such as Brazil, China and India, had not been fully arrested, according to the survey.  On the policy front, large-scale unconventional monetary easing by major developed countries had caused concerns over possible adverse effects on the financial and macroeconomic stability of developing countries.

Mr. Pitterle pointed out that although overall economic growth for the Asia-Pacific region was expected to increase to 6 per cent in 2013 from 5.6 per cent in 2012, it still lagged behind the average 7.8 per cent achieved in 2010-2011, and the 8.6 per cent observed during the pre-crisis period from 2002 to 2007.  Lower growth could become the “new normal” for the region, he said, emphasizing the importance of addressing structural challenges.

He went on to express concern that as the regional driver for growth, China’s economy had slowed down, experiencing significant deceleration in imports and exports since mid-2012.  While the survey expected some improvement in India, where growth was expected to rise from 5.0 per cent to 6.4 per cent, “sluggish” growth was expected in the Republic of Korea.  Furthermore, job creation in the region had slowed and in some countries, unemployment had increased, causing heightened economic insecurity.

More than a billion people in the region worked in vulnerable sectors characterized by difficult working conditions, low wages as well as a lack of benefits and job security, Mr. Pitterle pointed out.  In India, for example, the informal sector accounted for 85 per cent of the total workforce.  The situation was especially worrisome in the areas of youth unemployment and social security benefits.

He said the survey also pointed out impediments to growth, including income inequality, which had increased from 33.5 (Gini index) in the 1990s to 37.5 in the latest year for which figures were available.  In addition, it was essential to reform taxation systems as low tax revenues restricted Governments’ fiscal space and was associated with large fiscal deficits, as was evident in Pakistan.  Infrastructure deficit was also a major impediment to growth, especially in South Asia and the Pacific islands.  For instance, traffic congestion was responsible for shaving off 1.2 per cent of gross domestic product (GDP) in Indonesia and 2.1 per cent in Thailand, he said, underlining the need for more efficient public transport.

The unsustainable use of resources was also a major obstacle to growth in the region, Mr. Pitterle said, noting that Asia-Pacific economies needed more resources to produce one dollar of GDP.  There was a need to reduce resource-intensive growth as resource depletion had a negative impact on climate change.  The survey also found the region increasingly vulnerable to natural disasters, and noted an increase in disaster-related losses.

Based on an analysis of the challenges and impediments, the survey recommended safeguarding the sustainability of public investment strategies, Mr. Pitterle said.  It promoted the use of counter-cyclical fiscal and monetary policies, and stronger domestic resource mobilization, while also recommending enhanced international cooperation to strengthen tax-revenue collection.  The objectives of such policies would be to support output and employment growth, minimize the impact of external and other shocks on poverty, and expand governmental fiscal capacities.

Asked about the creation of social protection norms throughout Asia and the Pacific, Mr. Pitterle said the region was very diverse, and that while countries like the Republic of Korea had made progress in that regard, others had lagged behind.  It was therefore difficult to give a sweeping and general answer.  There was certainly greater awareness of social safety nets, especially in countries that had seen development in the last 20 years, specifically those in parts of East Asia.  With the region facing a changing population dynamic in the next 20 to 30 years, there was a lot of pressure to introduce old-age benefits and schemes, he said.  However, in countries like India, where 85 per cent of people worked in the informal sector, change would take time.

When asked why the report had a “depressed” tone compared to the “positive forecast” in last month’s United Nations Development Programme (UNDP) report on Asia, Mr. Hong said the former dwelled on the recent situation and the impact of the global economic crisis, while the latter focused on the long term.

Asked the extent to which the deceleration in developing countries was connected to the economic and financial crisis in the developed world, Mr. Hong said there certainly was a nexus, pointing out that developing countries in Asia had suffered a loss of 3.7 in GDP over the last four or five years since the crisis had struck.  However, the contribution of developing countries to global growth far exceeded their share of global GDP.

When asked whether any conclusions could be drawn about the global value of the deregulated free market economy, he said the survey did not cover that topic, but he would be glad to discuss it afterwards.

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