Governments in Asia and the Pacific should raise spending on social programmes to sustain the region’s robust economic recovery and ensure that the benefits of the revived growth trickle down to people most affected by the global financial crisis, according to a United Nations report released today.
“Governments must embrace this opportunity to secure the gains of the economic rebound by investing in social programmes that directly benefit people hardest hit by the crisis, act to reduce poverty, and create a more sustainable economy,” said Noeleen Heyzer, Under Secretary-General and Executive Secretary of the UN Economic and Social Commission for Asia and the Pacific (ESCAP), when she launched the report in Bangkok.
The Economic and Social Survey of Asia and the Pacific 2010 report, an annual publication of ESCAP, provides governments in the Asia-Pacific region, where 62 per cent of the world’s population live with a road map towards a more inclusive and sustainable development path.
According to the survey, even at the height of the economic crisis, Asia and the Pacific was still the fastest-growing region in the world, a trend supported mainly by fiscal stimulus packages made available by the region’s biggest economies.
The economic growth outlook for 2010 has improved significantly, with the region’s developing economies forecast to expand by seven per cent. China will be ahead of the pack with 9.5 per cent growth followed by India’s 8.3 per cent, according to the report.
The survey, however, points out that rising inflationary pressures, especially concerning food products, and asset price bubbles in a number of countries make 2010 a complex year for policy makers who will have to balance sustaining the momentum of growth with financial stability.
While monetary tightening measures may be necessary to restrain inflationary pressures, policymakers must be cautious about withdrawing fiscal stimulus packages lest the fledgling recovery process is disrupted, according to the report.
It also recommends the use of capital controls to moderate short-term capital inflows – the result of a massive expansion of liquidity in Western countries – which have created asset bubbles, inflationary pressures and exchange rate increases in the region’s developing economies.
“We know from experience following the 1997 Asian financial crisis that it may be years before the poorest people are able to recover from the past two year’s global crisis; governments need to maintain programmes to help people recover their assets and livelihoods,” Dr. Heyzer added.
According to the survey, a sustained, long-term development for all economies within the region will have to rely on creating new engines of growth by rebalancing the region with greater regional consumption through increased intra-regional trade, accelerating the development of an Asia-Pacific consumer market.
“This is the moment when the Asia-Pacific region can assure the long-term benefits of the recovery by creating a sustainable, inter-connected, greener, regional economy, while reducing the social and economic disparities which left it vulnerable to such [a] crisis,” said Dr Heyzer. “The region has the opportunity to strengthen its economy, its environment, its society, and better connect itself,” she added.
The report makes a number of regional policy recommendations for inclusive and sustainable growth, such as strengthening social protection and enhancing financial inclusion.
Increased social spending would directly support income security for households by providing food security, education and access to health care, reducing the need by poorer families to maintain precautionary savings to protect against adversity. These families would then be able to contribute more to local economies and invest more in their own development, the report notes.
“The region has close to one billion people living in poverty at this very moment. The more people we lift out of poverty today, the larger consumer class and developed markets we create for the future,” said Dr. Heyzer.
Jomo Kwame Sundaram, UN Assistant Secretary-General for Economic Development, said Asian and Pacific countries also needed to invest more on the improvement of their infrastructures..
He noted that more social spending should go to programmes aimed at boosting food production and to projects that promoted the use of environmentally-friendly technologies..
Mr. Sundaram also called for initiatives that promoted “financial inclusion” to ensure that poorer people were benefiting from the economic growth. Microcredit lending schemes would help make capital available to the poor, he told reporters in New York.