Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Global Launch of ESCAP’s 2013 Economic and Social Survey of Asia and the Pacific
18 April 2013, Beijing, China
Friends from the media,
Ladies and gentlemen,
It is my great pleasure to join you in Beijing today for the official global launch of the ESCAP 2013 Economic and Social Survey of Asia and the Pacific.
The annual Survey is ESCAP’s flagship publication, and is being launched today in 37 places around the world including Addis Ababa, Beirut, Brasilia, Helsinki, Geneva, New York, Paris, Rome and Santiago, as well as 28 Asia-Pacific locations.
The global launch of the Survey in China is significant at a time when the world’s second largest economy has undergone a leadership transition and is showing Asia and the Pacific the way with a policy shift towards more inclusive and sustainable development, which, according to the 2013 Survey, is going to benefit the entire region.
The 2013 Survey presents the outlook and prospects for our region, which, as we highlighted last year, is still facing the “new normal” of lower growth – as uncertainty and crisis deepen in the United States and the euro zone. The Survey also outlines a policy agenda for addressing these challenges and sustaining economic dynamism, while ensuring that growth is inclusive and environmentally responsible.
Since you all have copies of the 2013 Survey already, my aim this morning is to highlight a few key forecasts and to emphasize some of the major development challenges, opportunities and policy priorities, before opening the floor for any specific questions.
The theme of the 2013 edition of the Survey is Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Taking up the call by world leaders at the United Nations Conference on Sustainable Development, Rio+20, to put people at the centre of efforts to build a world of inclusive and sustainable economic prosperity, the 2013 Survey offers a blueprint for strengthening social and environmental resilience to fortify economic resilience.
The Survey comes at a critical juncture for Asia and the Pacific, as the continuing impact of the Great Recession of 2008-2009 exposes the weaknesses of the development paradigm that has seen rapid economic growth marked by rising inequalities and severe depletion of natural resources. “Grow first, distribute and clean up later” is no longer a viable or acceptable model.
In a first this year, the Survey estimates the investment needed for inclusive and sustainable development. The results are highly encouraging, showing that this is not only affordable for most nations, but does not carry any significant risk of macroeconomic destabilization.
I will now highlight a number of key growth projections from the 2013 Survey.
We are forecasting a modest increase in growth in developing Asia-Pacific economies to 6.0% this year up from 5.6% in 2012. But this growth is showing signs of strain, linked to uncertainty in the euro zone and the United States.
An important finding is that the relatively subdued growth, compared to the pre-global financial crisis period, could become the “new normal” for many regional economies if present economic trends were to continue and structural impediments are not addressed. This could mean an estimated output loss of $1.3 trillion by the end of 2017.
The main risk facing Asia-Pacific economies, with their reliance on developed-country export markets, is the persistent economic policy uncertainty in the euro zone and the United States, which is estimated to have reduced Asia-Pacific GDP by 3% over the past five years. This translates into a regional output loss of $870 billion since the onset of the global crisis in 2008.
However, Asia-Pacific remains the fastest growing region in the world, and continues to anchor the global economic recovery.
Nevertheless, the Survey warns against complacency and points to major development challenges and impediments to growth.
Asia-Pacific growth continues to leave behind hundreds of millions of people. More than 800 million still live on less than $1.25 a day, and about an equal number are vulnerable to extreme poverty; over half a billion are undernourished, and an estimated 1.1 billion workers are in vulnerable employment. The vulnerability of the poor is also heightened by frequent and severe natural disasters.
Regional inequalities have also widened, with over 3 billion people now affected in just 8 countries. Inequality has increased in East and North-East Asia, North and Central Asia, and Southeast Asia.
The “race to the bottom” has seen a slide in labour standards, with growing exploitation of migrant workers, women and girls, together with environmental degradation as well as biodiversity loss.
But, as the Survey shows, innovative national policies can address these challenges, promoting inclusive growth in win-win solutions for all.
The Survey highlights China’s rebalancing of its economy towards a more pro-poor and domestic consumption-led pattern of growth, which ESCAP estimates show would also benefit other Asia-Pacific countries with their consumer goods exports to China increasing by $13 billion during 2013-2015.
Another example is the recent minimum wage adjustments in Thailand. ESCAP’s analysis shows this will increase job and GDP growth by 0.6% and 0.7%, respectively.
Likewise, India’s eight-year-old national rural jobs guarantee law has not only helped reduce poverty but also strengthened rural growth, the economic resource base and social protection.
The Bangladesh Bank has facilitated banking services to millions of poor free of charge to enable direct cash transfer of agricultural input subsidies and social safety net payments.
I would like to turn now to the main contribution of the 2013 Survey, which is to provide options and suggestions for policymakers concerned about the public investment needed to implement a bold, new agenda for inclusive and sustainable development.
The Survey has estimated the cost of providing an illustrative package of policies comprising six elements: a 100-day-per year job guarantee to all in the informal sector; a universal pension scheme for the elderly; disability benefits; increasing public spending on health to 5% of GDP by 2030; universal school enrolment by 2030; and universal access to modern energy by 2030. Here I would like to mention that initiatives aimed at high-quality schooling are increasingly complementing the earlier focus on expansion of education.
The assessment covered 10 Asia-Pacific nations which together are home to more than 90% of the developing Asia-Pacific population: Bangladesh, China, Fiji, India, Indonesia, Malaysia, Philippines, Russian Federation, Thailand and Turkey.
ESCAP’s analysis finds that the total investment needed to provide the above package of policies would constitute no more than 5-8% of GDP for most countries.
In the case of China, this would amount to 2.6% of GDP in 2013, rising to 3.3% in 2020 and 5.2% by 2030. For India, the needed investment is 5.5% in 2020 and 8.8% of GDP in 2030.
Estimates for Indonesia, Malaysia, the Russian Federation, Thailand and Turkey, range between 5% and 8% by 2030.
The good news is, that while the public investment needs of such a package are not small, ESCAP’s analysis shows these are affordable investments in the future we want, for most countries of Asia and the Pacific.
Because of the low tax revenue-to-GDP ratios in the region, measures such as broadening tax bases, making tax structures more progressive, improving the efficiency of tax administration, tighter regulations on capital flight and fighting corruption as well as reducing non-development expenditure could generate the requisite financing for most countries in the region.
However, LDCs and small island developing states would have to supplement domestic resources through global partnerships and development cooperation, including cooperation to stop the illicit transfer of funds.
Moreover, ESCAP’s analysis shows that such investment would not significantly jeopardize macroeconomic stability, making this a win-win policy approach for ALL.
The central message of the 2013 Survey is the need for a paradigm shift in macroeconomic policymaking to focus on its developmental role which has been overshadowed by emphasis on debt and inflation control over the past three decades.
The dominant macroeconomic policy paradigm since the early 1980s has been too restrictive and not geared towards a great leap forward to inclusive and sustainable development.
In the light of the region’s high degree of economic insecurity, large development and infrastructure gaps, and heightened environmental fragility, along with extreme exposure to climate change-related risks, it is necessary to better balance the stabilization and developmental roles of macroeconomic policies.
Macroeconomic policies could and should be more forward-looking, to help bring about the region’s next great transition to inclusive, resilient, equitable and sustainable development.
World leaders have already committed to forward-looking macroeconomics in both the 2010 MDG Summit and the 2012 Rio+20 Conference.
The 2013 ESCAP Survey shows how this can be achieved. ESCAP is the first among the UN family to have estimated the investment required for six basic social, economic, and environmental programs.
My colleague, Anis Chowdhury, and I will be available for any specific questions you may have about the 2013 Survey.
I thank you.