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Economic and Social Prospects of Asia and the Pacific: Fostering an Inclusive and Sustainable Future Dr. Nagesh Kumar Chief Economist United Nations Economic.

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Presentation on theme: "Economic and Social Prospects of Asia and the Pacific: Fostering an Inclusive and Sustainable Future Dr. Nagesh Kumar Chief Economist United Nations Economic."— Presentation transcript:

1 Economic and Social Prospects of Asia and the Pacific: Fostering an Inclusive and Sustainable Future Dr. Nagesh Kumar Chief Economist United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) 23 May, 2013: Astana, Kazakhstan

2 Economic Outlook of Asia and the Pacific 2013 2 Growth forecast for 2013 to increase slightly to 6% from 5.6% in 2012 – China to grow at 8%, up from 7.8% in 2012 – India to grow at 6.4%, up from 5% in 2012 – Russian Federation to grow at 3.6%, up from 3.4% in 2012 Inflation likely to remain at 5.1% in 2013 – Risk of oil and food price increase Subdued growth could be “new normal” Yet Asia-Pacific region remains the fastest growing region in the world and anchors recovery

3 Diverse sub-regional outlook North and Central Asia to grow at 4% in 2013 up from 3.9% in 2012 Kazakhstan to grow at 6%, up from 5% in 2012 Inflation likely to be 6.4% in 2013 compared to 5.4% IN 2012 North and Central Asia more exposed to commodity-related risks Development of infrastructure is key to accelerate growth especially for landlocked countries in North and Central Asia 3

4 Policy challenges : Continued global economic uncertainty 4 Fiscal crisis in the euro zone + Policy uncertainty in US Impact on Asia-Pacific Decreased economic activity through the trade and finance channel Estimated regional GDP loss of 3% since the onset of the global crisis five years ago - $870 billion Loose monetary policies, quantitative easing (QE), of the developed world Impact on Asia-Pacific Short-term capital flows volatility Rapid short-term currency appreciation Food and fuel price volatility Impact on Asia-Pacific Poverty and inflation

5 Growing Economic insecurity 5 Decreased job growth, increased economic insecurity and vulnerabilities – High incidence of informal sector jobs – Nearly 1.1 billion of the region’s workforce remain trapped in low quality, more pervasive among women and youth than men Youth employment information – Youth unemployment is forecast to edge slightly upwards in 2013 – 13.4% in South-East Asia and the Pacific, 10% in South Asia and 9.8% in East Asia Low social security – Less than 2% of GDP in many countries

6 Growing inequality 6 Income inequality (Gini index) increased from 33.5 in the 1990s to 37.5 in the latest available year Inequality-adjusted ‘real’ GDP per capita falls Sri Lanka : GDP per capita $4,555 to ‘real’ GDP per capita $2,323 (in 2005 PPP) Republic of Korea : GDP per capita $27,415 to ‘real’ GDP per capita $19,492. Inequality reduces social development gains by over 20% Pakistan : Gains reduced by over 30% Russian Federation : Gains reduced by over 10%

7 Infrastructure deficits 7 Impediment to growth, especially in South Asia and the Pacific islands – LDCs of the region, such as Afghanistan, Cambodia and Myanmar have the largest infrastructure deficits – Power is the most critical bottleneck and then transportation Economic cost of traffic congestion: Indonesia : 1.2% of GDP Thailand : 2.1% of GDP Republic of Korea : 2.6% of GDP Financing requirement in the region – $600 billion to $800 billion per year

8 Unsustainable resource use 8 Asia-Pacific economy is consuming more resources to produce one dollar of GDP Future growth of resource use in several countries holds significant implications for overall resource demand Vulnerability to natural disasters – 42% of the global economic losses due to natural disasters – Disaster losses since 1980 have increased by 16 times in Asia while GDP per capita has grown by only 13 times

9 Need for rebalancing The medium-term need for the region continues to be to redirect its growth drivers from extra-regional demand to intra- regional and domestic demand Policies should be designed to: Increase the inclusiveness of growth Broadening social protection and providing quality public service delivery Foster the development of the agricultural sector Sustainable, knowledge-intensive “green revolution” Support the “green economy” Public-private finance and low-cost access to technology Exploit the potential of regional economic integration 9

10 An inclusive and sustainable development agenda for Asia and the Pacific 10 A job guarantee programme – 100 days per year for participants A universal pension for elderly – For all aged 65 or older Benefits to all persons with disabilities – Ages of 15 and 65 Increasing the share of public health expenditures – 5% of GDP by 2030 Universal enrolment in primary and secondary education – Primary by 2020 and Secondary by 2030 Energy access to all – Modern energy services by 2030

11 Investing in inclusive and sustainable development 11 Overall public expenditure and investment requirements to implement such a policy package vary across countries Total investment needs of above package of policies 5% to 8% of GDP by 2030 Public investment needed to deliver policies to sustain growth and promote inclusive and sustainable development – In the case of China, the cost of the package is projected to reach 3.3% of GDP in 2020 and 5.2% of GDP by 2030 – The cost of the package is projected to exceed 10% of GDP by 2030 only in Fiji (13%) and Bangladesh (22%)

12 Such an agenda is generally affordable 12 Most countries can self-finance without jeopardizing macro stability, by – broadening tax bases – By making tax regimes more progressive – tax administration more efficient – Creating new sources of revenue including taxes on capital flights – fighting corruption – reducing non-development expenditures LDCs would need global support

13 Region is gradually moving towards such policies 13 Thailand has evolved universal health package and has now raised minimum wages National rural jobs scheme in India – 48 million households provided employment in over 600 districts in 2012-13 Inclusive finance in Bangladesh – 10 million new bank accounts for smallholder farmers China’s economic rebalancing to make growth more inclusive; good for region and beyond

14 New development paradigm in Asia-Pacific 14 Investing in social and environment pillars fortifies economic pillar… – Leads to sustained, inclusive and equitable economic growth Grow now, distribute + clean up later is not an option Critical for sustaining region’s dynamism

15 Thank you Economic and Social Survey of Asia and the Pacific 2013 is downloadable on:

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