High inflation levels threaten region’s recovery from crisis, ESCAP tells Asia-Pacific economic policymakers

High inflation levels, in particular food and fuel prices could reduce Asia-Pacific growth by as much as 1.5 per cent over this year and next, the United Nations told senior government economic policymakers from across the region meeting here this week.

Combined with the deteriorating global economic environment, this is making it difficult for the region to meet international development goals and the time has come for developing Asia-Pacific countries to see poverty reduction and inclusive development as growth drivers rather than just social welfare programmes, the top United Nations official in the region said.

“With close to a billion people living in poverty and wide development and MDG (Millennium Development Goal) gaps, the region has substantial potential for generating new aggregate demand to sustain its growth,” Dr. Noeleen Heyzer, Executive Secretary of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) told delegates to the ESCAP Committee on Macroeconomic Policy, Poverty Reduction and Inclusive Development.

The Second Session of the biennial ESCAP forum held from 7 to 9 December has brought together central bankers, policy advisors and development experts from 29 Asia-Pacific countries to discuss a policy agenda to promote sustainable and inclusive development in the region which is home to the majority of the world’s most deprived individuals.

Addressing the Committee, Deputy Prime Minister and Minister of Commerce of Thailand, H.E. Mr. Kittiratt Na-Ranong highlighted the central place of sustainable growth and inclusive development in Thailand’s national development agenda.

“Of all the eight MDGs set against the 2015 timeframe, I am proud to report that Thailand has achieved every goal except only one concerning maternal mortality. Our achievements result from people-centered policies, sustainable development agendas, eradication of extreme poverty, good governance, and close international cooperation,” Mr. Kittiratt said.

Although the Asia-Pacific region as a whole has already met the MDG relating to halving the incidence of extreme poverty, the performance across the region remains uneven, particularly in least developed countries and other countries with special needs, Dr. Heyzer pointed out.

Asia and the Pacific is still home to 870 million people living below $1.25 a day, accounting for almost 70 per cent of the world’s disadvantaged population. According to latest ESCAP estimates, poverty levels are highest in South and South-West Asia (36.1 per cent), followed by South-East Asia (21.2 per cent), East and North-East Asia (13.0 per cent), and North and Central Asia (8.3 per cent).

However, much could still be done despite the difficult economic environment. “For instance, all the off-track countries in the region could meet the target of reducing by half those suffering from hunger, if they can reduce the prevalence of underweight children by 2 per cent each year,” the ESCAP Executive Secretary said. “Most of the 20 countries currently off-track in providing safe drinking water can reach that target if they can increase their access rates by less than 2 per cent annually.”

The global economic crisis is an opportunity for the Asia-Pacific region to readjust its growth, Dr. Heyzer pointed out. “The Asia-Pacific region has to rebalance itself in favour of greater domestic and regional demand to sustain its dynamism. With close to a billion people living in poverty and wide development and MDG gaps, the region has substantial potential for generating new aggregate demand to sustain its growth.”

A highlight of the ESCAP Committee session was a lecture by Nobel Economic Laureate Professor Robert Mundell of Columbia University, New York on the topic “Global Currency: Dollar, Euro, Renminbi”. The event was part of the ESCAP Distinguished Person Lecture Series moderated by the Executive Secretary.

In his presentation, Prof. Mundell, regarded as the intellectual father of the euro, fielded questions from Asia-Pacific central bank chiefs, senior government officials, and representatives of the private sector and academic community on policy options before the region as it braces for the likely adverse impact of the eurozone crisis. While acknowledging the seriousness of the sovereign debt troubles, Prof. Mundell expressed his confidence that the 13-year old currency will survive.

Moreover, Prof. Mundell said that times of crisis also present opportunities for reform and called for the creation of a world currency, anchored by the US dollar and euro with backing from the Chinese yuan. He said this would help prevent huge exchange rate instabilities which prompted major debt and financial crises in recent decades.

Note to Editors: ESCAP will launch its’ Year-end Update of the Economic and Social Survey of Asia and the Pacific 2011: Steering Asia-Pacific development through global turbulence at the Foreign Correspondent’s Club Thailand on Friday, December 9.