Asia-Pacific increasingly affected by global economic slump, says ESCAP
Fiscal cliff could markedly cut regional growth
Development in Asia and the Pacific is increasingly being affected by the ongoing slowdown in the global economy as well as structural problems within the region’s economies, according to latest United Nations macroeconomic projections and policy advice released here today.
Growth in the developed world continued to slow during 2012 leading to falling demand for exports and a broad-based slowdown in Asia and the Pacific, says the Economic and Social Survey of Asia and the Pacific 2012: Year-end Update, published by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
Addressing the reasons for the slowdown, Dr. Noeleen Heyzer, United Nations Under-Secretary-General and ESCAP Executive Secretary stressed: “Along with the ongoing problems in the euro zone which have led to a double-dip recession in many of those economies, Asia and the Pacific stands to be significantly hit by the possible contours of any compromise agreement to resolve the fiscal cliff in the United States.”
ESCAP estimates that failure to resolve this adequately could lead to growth in Asia-Pacific economies slowing by up to 2.2 percentage points in 2013, with exporting economies such as Singapore, Hong Kong, China and Malaysia being most hit.
A number of large economies in the region, most notably China and India, which proved resilient in the early part of the crisis, have also recently slowed markedly, leading to the support they provided to other Asia-Pacific economies through intraregional demand lessening. The slowdown in China during 2011/12 has had a significant impact on the region, with ESCAP analysis indicating that estimated growth in gross domestic product (GDP) has been up to 0.7 percentage points lower for economies and caused estimated GDP losses for the region of $49 billion.
Near-term economic performance of the region is likely to pick up in 2013, but will still be below its growth potential. The expected rebound in 2013 is still below the trend of 8 per cent in 2010-2011, and more notably relative to the pre-crisis pace of 8.5 per cent during 2002-2007.
According to ESCAP, the developing Asia-Pacific region is projected to expand by 6.3 per cent in 2013, up slightly from 5.6 per cent in 2012. China is forecast to grow by 8.2 per cent in 2013 compared to estimated growth of 7.8 per cent in 2012. India is projected to recover moderately to 6.8 per cent in 2013. GDP growth of major exporting economies is also forecast to see moderate improvement in 2013, with Singapore expanding by 3.6 per cent, Hong Kong China by 3.7 per cent and the Republic of Korea by 3.5 per cent.
Solid private consumption will support Thailand's favourable near-term outlook, with growth forecast at 5 per cent in 2013, boosted by higher minimum wage levels, continued fiscal support and modest inflation.
Speaking at the launch, Anis Chowdhury, Director of ESCAP’s Macroeconomic Policy and Development Division warned: “The impact of the generalized slowdown in 2012 on inclusive and sustainable development in the region stands to be substantial. Job and income growth is expected to decline, with fewer people forecast to be able to pull themselves out of poverty.”
ESCAP estimates that, by 2013, some 10 million people in the Asia-Pacific region will be affected when considering the poverty line of $1.25-a-day, and 13.7 million people based on a $2-a-day poverty line. This means that nearly 14 million fewer people in the region would be able to escape poverty due to the ongoing global economic crisis.
The slowdown of the pace of poverty reduction in the region is expected to have the greatest impact on the South and South-West Asia subregion, which is home to more than half a billion poor, accounting for about 44 per cent of the world’s poor. In particular, as a result of this, the achievement of the Millennium Development Goal of halving extreme poverty in Bangladesh and India will be particularly affected.
The slowdown even among the economies of the region with a larger domestic market clearly points to the shortcomings of their development strategies in ensuring sustained economic progress. With regard to the export-led economies, the declining contribution of their export sectors has also created the need to alter their development model in order to boost domestic sources of growth.
The Year-end Update advises the structural solution to invigorating the domestic drivers of growth will lie in making their development process more inclusive and sustainable.
“Fortunately, many economies in the region are well-placed to undertake the measures required, through the use of well-targeted fiscal and monetary stimulus policies directed to productive and social sectors of the economy which generate high employment and have lower carbon intensity,” said Dr. Chowdhury. “The region also has various mechanisms in place that can be strengthened and expanded in order to enhance regional cooperation in dealing with common challenges.”
ESCAP’s policy advice recommends directing spending to building infrastructure in order to enhance human capital, empowering the poor and vulnerable sections of society by increasing social protection, and improving the environmental sustainability of growth in the region by spending on areas such as renewable energy and public transport.
The Update also highlights the need to strengthen regional cooperation to fund infrastructure spending, as well as other challenges including food and energy insecurity, disaster risks and climate change.
Please find the report from this link: http://www.unescap.org/pdd/publications/yearend2012/.