Boost domestic demand to revive growth: ESCAP

19 Jan '16

4 min read

Economic growth in the Asia-Pacific region is neither robust nor inclusive enough to support the 2030 Agenda for Sustainable Development, according to the year-end update of the flagship report of the United Nations Economic and Social Commission for Asia and the Pacific. The report, released last week in Bangkok by Dr. Shamshad Akhtar, Executive Secretary of ESCAP, highlights the importance of reinvigorating domestic demand and recommends that countries take a more proactive stance on fiscal policy and strengthen productivity rather than relying excessively on debt to sustain growth.

“The adoption of the 2030 Agenda comes at a time when the global policy makers are still struggling to revive economic growth despite taking extraordinary measures. While the 2030 Agenda promotes a broader concept of human welfare, robust growth is important for creating jobs and improving overall development outcomes”, said Dr. Akhtar. She added that “the slowdown in the region's economic growth is raising doubts about Asia and Pacific's continued ability to lead the way forward to global economic recovery.”

The year-end Update of the Economic and Social Survey of Asia and the Pacific 2015 shows that developing economies in the Asia-Pacific region grew by an estimated 4.5 per cent in 2015, the lowest since 2009, as private consumption and investment slowed down while exports remained sluggish. An expected boost from the moderate recovery in advanced economies and lower international commodity prices has been offset by the gradual slowdown in the Chinese economy, which is also impacting equity and currency markets in China as well as the region and beyond. This seems to be just a financial market correction as economic fundamentals of China remain broadly strong. Nevertheless, China does face substantial challenges to sustainability of its growth such as high inequalities, rapid accumulation of private debt, and serious pollution issues.

A modest rebound to 5 per cent growth is forecast for 2016, compared to an average 9.4 per cent growth in 2005-2007 before the global financial and economic crisis. Other than weak external demand, domestic factors such as weak productivity and wage growth, infrastructure bottlenecks, and slower implementation of reform measures are holding back the growth potential of the region.

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