East Asian countries review macroeconomic policies for inclusive growth amidst global crisis

East Asian countries review macroeconomic policies for inclusive growth amidst global crisis (Photo Credit: Kibae Park)

Key economic policymakers from across Southeast and East Asia are taking part in a United Nations-sponsored consultation here this week on ways to sustain regional growth amidst persisting global uncertainty and to make it more inclusive as inequality and economic insecurity are on the rise.

Top-level central bankers, finance and planning ministry officials from 10 South-East Asian nations, China, Japan, Mongolia and the Republic of Korea are attending the 15-17 May High-level Policy Dialogue on "Macroeconomic Policies for Sustainable Growth with Equity in East Asia" convened by the Bangkok-based United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and hosted by the Bank Indonesia and the Ministry of Finance of the Republic of Indonesia.

“The global environment is a very challenging one, perhaps the most challenging in many decades,” Anis Chowdhury, Director, ESCAP Macroeconomic Policy and Development Division said in his opening remarks to the Policy Dialogue, adding that macroeconomic policies can be “powerful tools to build more inclusive, sustainable and resilient economies” in the face of the “new normal of lower growth and increased volatility”.

In a special address to the forum, Mahendra Siregar, Vice Minister, Ministry of Finance of Indonesia said that the region will have to adapt to the current global economic situation and noted that stepped up public social spending will be key to the regional response. “Policies to enhance access to high-quality education, health and social protection could contribute to enhancing the size of the consuming class and support economic growth. Therefore, such policies will not harm fiscal sustainability.”

Perry Warjiyo, Deputy Governor, Bank Indonesia called for a new approach to macroeconomic policymaking “in order to balance the objective of stability with that of sustainable and equitable growth”. The formulation of such policy approach, he said, should take into account the need to increase domestic demand to compensate for weaker demand from developed countries, that not all capital inflows are beneficial, the need to enhance productive capacities by investing in human capital and infrastructure, and the imperative to reduce poverty.

In addition to coping with the adverse fallout of the prolonged weakness and policy uncertainty in advanced economies, which also includes massive short-term capital inflows, developing nations in East Asia face structural impediments to inclusive growth – rising inequality, large gaps in social protection and inadequate investment in infrastructure and agriculture.

The Yogyakarta Policy Dialogue is reviewing issues ranging from current economic policies and the role of capital flows management and other macroprudential measures in ensuring financial stability to the impact of the composition of government expenditures on long-term growth.

Building on similar consultations organised by ESCAP in the wake of the global financial crisis, including those held in Bangladesh, Bhutan, Cambodia, the Philippines and Fiji, the Yogyakarta Policy Dialogue highlights the need for forward-looking macroeconomic policies to balance short-term stabilization and long-term development goals.