Developing economies of the Asia-Pacific region grew by an estimated 4.5 per cent in 2015, the lowest rate since 2010, with only a modest rebound to 5 per cent growth projected for 2016. While global trade and China’s economy explain much of the recent slowdown, there are also signs of weakening productivity growth in the region. Compared to the past, lower interest rates and exchange rate depreciations have had less noticeable impact on domestic activity and exports. Meanwhile, rapid increases in household and corporate debt in some countries pose risks for financial stability. At the same time, growth has not been sufficiently inclusive. This is a concern as robust and inclusive growth is important for creating jobs and improving broader development outcomes as envisioned in the 2030 Agenda for Sustainable Development.
The Year-end Update of ESCAP’s annual flagship publication, Economic and Social Survey of Asia and the Pacific, provides the latest macroeconomic forecasts, identifies emerging risks and challenges, and takes stock of fiscal, monetary and structural policy developments in the Asia-Pacific region. Against the recent slowdown, a key message is the need to reinvigorate domestic and regional sources of demand instead of relying primarily on external demand. This would entail rebalancing towards consumption in some cases and boosting investment in others, including in infrastructure. Given weakening and uneven productivity growth, the report calls for greater attention to small and medium-sized enterprises and the agricultural sector, the contribution of which to total value added is disproportionately small compared with their total employment share. In this vein, fiscal policy has a critical role to play.