Increasing productivity is key to revive economic growth and support the 2030 Agenda in Asia-Pacific, says UN
ESCAP flagship Survey cautiously optimistic about economic prospects
in South and South-West Asia
New Delhi , 28 April 2016– As nations begin implementing the 2030 Agenda for Sustainable Development, the next phase of Asia-Pacific economic growth should be driven by broad-based productivity gains, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said in its flagship publication Economic and Social Survey for Asia and the Pacific 2016 launched on 28th April 2016, emphasizing that this will require higher, targeted fiscal spending, enhanced skills, better infrastructure, and improved agricultural productivity.
In the developing countries of Asia and the Pacific, annual average growth of total factor productivity declined from 2.8 per cent in 2000-2007 to just below 1 per cent in 2008-2014, according to the Survey.
The productivity slowdown accounts for almost a fifth of the recent economic slowdown, from an average of 9.4 per cent during 2005-2007 to an estimated 4.6 per cent growth in 2015. ESCAP underscores that this is a concern because sustained and resilient economic and productivity growth, backed by balanced economic, social and environmental development, is a prerequisite for successful implementation of the 2030 Agenda.
Launching the Survey in Bangkok, Dr. Shamshad Akhtar, United Nations Under-Secretary-General and ESCAP Executive Secretary emphasized that steady growth in real wages, which is critical for tackling poverty and inequality, as well as supporting domestic demand, also ultimately depends on productivity growth.
“Concerted efforts are needed to revive the region’s economic dynamism and more effectively pursue the 2030 Agenda,” said Dr. Akhtar. “Such interventions, particularly through fiscal measures, could support not only domestic demand but also strengthen the foundations for productivity-led growth, while fostering real demand through social safety nets and wage increases.”
Noting that the Asia-Pacific region has the means and dynamism to revive economic growth, Dr. Akhtar acknowledged that: “Improving the quality of this growth by making it more inclusive and sustainable, will be especially demanding.”
The Survey calls for continued rebalancing towards domestic and regional demand, as prospects for export-led growth remain subdued. A confluence of macroeconomic risks including shifts in global financial and commodities cycles has also increased uncertainty. The Survey highlights that despite emerging challenges the region’s economic outlook is broadly stable and forecasts a moderate pickup in economic growth in developing Asia and the Pacific to 4.8 per cent in 2016 and 5 per cent in 2017.
The Survey notes that progress in reducing poverty is slowing and inequalities are rising in much of the region. At the same time, an expanding middle class and rapid urbanization are posing complex economic, social, environmental and governance challenges. The region also faces increased financial volatility and capital outflows, which have limited the space for monetary policy manoeuvring, despite low overall inflation. Several countries are also experiencing a private debt overhang after rapid increases in household and corporate leverage in recent years.
ESCAP recommends that if the region is to shift to a more sustainable development strategy driven by domestic demand, greater focus must be placed on productivity along with commensurate increases in real wages. According to ESCAP, a productivity-driven, wage-led approach would enable countries to increase their aggregate supply and demand, thereby enhancing well-being.
To boost productivity, the Survey recommends a cross-sectoral and integrated approach. It notes that several countries in the region are deindustrializing too early in their development, by shifting from agriculture-based economies to ones in which services play a dominant role. With more than half of the region’s population living in rural areas, and four out of ten workers engaged in agriculture, efforts should instead be strengthened to boost agricultural productivity and foster rural industrialization and urban-rural linkages. The Survey estimates that a modest increase in agricultural productivity could lift an additional 110 million people out of poverty by 2030, but that improvements in knowledge and skills will be critical, to enable absorption of the large pools of surplus labour that are being released in the rural sector.
The Economic and Social Survey of Asia and the Pacific was launched simultaneously in New Delhi, along with 23 other locations around the Asia-Pacific region.
Presenting highlights from the Survey to the press, Dr. Nagesh Kumar, Head, ESCAP South and South-West Asia office, stated: “The economic growth outlook for Asia-Pacific is stable yet clouded by uncertainty, owing to weak global aggregate demand, a slowdown in productivity growth and moderate economic growth in China.”
“South and South-West Asia continues to recover from a recent post-crisis downturn and is expected to drive growth, with India having a special mention in this year’s Survey as the fastest-growing major economy in the world in 2015”.
According to the Survey, gradual improvement in the subregion’s growth outlook is projected to inch up to 5.9% in 2016 and 6.3% in 2017, supported by the lifting of sanctions on the Islamic Republic of Iran and Nepal’s rebuilding of its earthquake-ravaged infrastructure, and by the boost to Pakistan’s economic outlook.
“The Survey warns of a number of macroeconomic risks that may hurt growth prospects. However South and South-West Asia’s relative growth resilience is noteworthy and economic prospects are cautiously optimistic in the subregion. This positive outlook is premised on continued policy reforms that are critical for enhancing FDI inflows and raising investment rates, especially as most economies in the subregion exhibit limited room for fiscal policy responses when faced with adverse shocks”, Dr. Kumar continued.
Given the Asia-Pacific region’s diversity, the Survey highlights specific policy issues, such as improving female labour participation in South and South-West Asia; enhancing resilience to natural disasters in the Pacific; dealing with population ageing challenges in East and North-East Asia; economic diversification and services sector development in North and Central Asia; as well as tax policy and administration reforms in South-East Asia.
In light of the vital importance of alleviating poverty, creating decent employment and reducing inequality in South and South-West Asia indeed, this year’s Survey places special emphasis on boosting women’s workforce participation in the subregion, as the median female labour force participation, at 35.5% in 2013, is lower than that of all other regions of the world, except the Middle East and North Africa.
“The work of ESCAP in the subregion has also emphasized the importance of creating an enabling environment for women’s entrepreneurship, which could be a potent catalyst for change and has underscored a range of policy options to unleash this untapped potential”, Dr. Kumar stated.
Held at the United Nations Conference Hall, New Delhi, the launch brought together some 30 media representatives, development experts and academia.
Dr. Rathin Roy, Director, National Institute of Public Finance and Policy participated in the Survey launch and commended ESCAP for the high quality of the analysis presented in the Survey. He stressed that macroeconomic indicators placed India in a sweet spot but that major constraints exist, including on the supply side, along with social deficits, that prevent the country from achieving much higher levels of growth.
The New Delhi launch was organized jointly with the United Nations Information Centre for India and Bhutan. For a full copy of the survey visit: http://www.unescap.org/publications/economic-and-social-survey-asia-pacific