Aim for balanced growth in the region

Even if it does turn out to be only 6 per cent this year, bullish observers might argue that the region's economic growth will still be an improvement over last year's 5.6 per cent, and at least three times better than those forecast for rich countries. But if there is temptation to look at the projection last week by the Economic and Social Commission for Asia and the Pacific (Escap) as a glass half full rather than half empty, another of Escap's predictions should be sobering enough: many regional economies are growing so slowly they are setting a "new normal" that could mean economic output losses amounting to US$1.3 trillion by the end of 2017.

And, not surprisingly, it is the persistently weak advanced economies that are keeping many countries in the region from returning to strong pre-crisis growth. This is obviously a consequence of increasingly globalised economic interdependence. Almost five years since the great recession hit, major economic powers such as the US and the European Union continue to lurch from one crisis to another. They have not found a clear path to recovery. Instead, preoccupation with debt and deficit has led them to unconventional monetary policies.

As chairman of the International Monetary Fund financial committee, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam has made a timely call for global policy coordination to boost growth without the risk of negative spillovers. Loose stimulus measures are unsustainable as they lead to problems elsewhere, such as asset bubble inflation, currency volatility and less competitive exports.

In its economic survey of Asia and the Pacific, Escap has pointed out that measures to stimulate demand must go hand in hand with macro-economic improvements to promote broad-based development. Asian countries are unlikely to achieve such growth if they continue to neglect infrastructure and human capital investment. Poverty and inequality have risen even during rapid growth. These set back economic and social gains and also suppress domestic demand.

Instead of simply slashing social spending to balance the budget, many countries will see more economic benefits in the longer term by shifting toward greater public expenditure on education, health and other social sectors. Apart from creating jobs for their burgeoning populations, they need to also prepare the young for jobs of the future.

Growing at lower than double-digit rates requires difficult adjustments but, effectively made, these will help return countries to high growth that is both balanced and sustainable.

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Article source: http://www.thethailandlinks.com/2013/04/26/aim-for-balanced-growth-in-the-region/