by Allanah Leahy – EM TV Online
The Asia-Pacific region is expected to experience a moderate growth increase in 2015, according to the UN Economic and Social Commission for Asia and the Pacific (ESCAP).
ESCAP speculates that growth prospects would be better supported by much-needed structural reform.
Lower oil prices would also prove an additional boost to the economy and provide the opportunity to mobilise resources for inclusive and sustainable development.
Developing countries in Asia and the Pacific are predicted to grow at an average of 5.8 per cent this year – a step up from 5.6 per cent in 2014. This is driven by improved economic performances in Republic of Korea, India, Bangladesh, Indonesia, Papua New Guinea and Thailand.
Structural reforms in India and Indonesia are projected to back the growth increase to 6.4 and 5.6 per cent respectively. Growth in China is projected to linger around seven per cent in 2015, in accordance with their ongoing economic rebalancing.
The report indicates that the decrease in regional inflation this year makes room for looser monetary policies in regional economies to support growth.
UN Under Secretary General and ESCAP Executive Secretary, Dr Shamshad Akhtar, who unveiled the report, said:
“Despite improved prospects, many developing economies in the region face structural constraints which have kept them from realising their growth potential. Infrastructure shortages remain acute and growth has not translated into enough decent jobs.”
The report speculates a varying impact across the region in response to the steep decline in oil prices. For energy-importing countries, the report estimates that a $10 per barrel fall in the oil price would inflict up to 0.5 per cent in GDP growth.
Growth in the Russian Federation could be reduced by 1.1 per cent, however, depriving neighbouring Central Asian countries of up to $1.7 billion in remittances from nationals working in the Russian Federation.
Slow growth in the Eurozone and Japan, as well as China’s moderate growth will be a challenge, while Asia-Pacific exporting economies will be supported by a recovering United States economy.
ESCAP alerted the region of an expected rise in interest rates by the US Federal Reserve, which will be the cause for capital outflows.
ESCAP projected higher growth throughout all Asia-Pacific sub-regions this year, save for North and Central Asia, where growth is expected to decline to 0.2 from 1.0 per cent last year.
Developing countries in the Asia-Pacific are urged to bridge physical and social infrastructure gaps.
The report highlights ways to increase infrastructure financing and recommended labour market reforms to increase decent job opportunities.
Declining global oil prices have made a valuable opportunity for Asia-Pacific economies to reduce fuel subsidies that take a large share of the national budget in many countries in the region.
The report details that regressive fossil fuel subsidies benefit the rich, with little impact on poverty reduction.
It further states that savings from a cut in these areas could be better invested into more productive and inclusive development.
“This is a particularly critical and opportune time to decrease subsidies,” Akhtar said, adding that it would prepare governments to secure more challenging global financing in the near future as well as reduce budgetary strains.
“Reducing subsidies can raise significant public financial resources for productive investment in the region and could make needed funds available for financing sustainable development,” Akhtar finished.