Higher productivity key to Asia-Pacific economic growth
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 UN 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 in Bangkok on Thursday, the survey emphasizes 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, the survey found.
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, UN 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. 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.