Domestic challenges block path to Asia-Pacific growth

Asia-Pacific countries continue to drive the global economy, though regional growth is now in a challenging phase. The 2014 Economic and Social Survey of Asia and the Pacific forecasts a third successive year of growth below 6 per cent in Asia-Pacific developing economies.

However, this conceals a wide variation in performance among some major developing economies, ranging from a 7.5 per cent 2014 growth forecast for China, to just 0.3 per cent for Russia.

Regional growth dynamics are being influenced by the anaemic recovery in the developed world. Yet overcoming domestic structural impediments is also vital. Widespread poverty, rising inequality, social inequity and environmental degradation are hurdles to be cleared before the region can set itself on the fast track to high growth that is stable and inclusive.

Escap's research highlights these specific challenges:

• The ongoing normalisation of monetary policy by the US Federal Reserve poses continuing challenges for developing Asia-Pacific countries, but these can be mitigated by stronger macro-prudential policies and flexible exchange rate management.

• If the G20 continues to delay implementation of their standstill commitments to target trade protectionism, Asia-Pacific export growth will be affected.

• On the domestic side, countries need to implement labour market programmes that effectively align and strengthen education, training and skills with the requirements of employers.

Without adequate social protection systems, high-quality education, better access to credit and land, as well as stronger labour market institutions, developing countries will be unable to tackle high and rising inequality.