Asia Pacific needs to build up on domestic demand, says UN

MANILA, Philippines - As economies strive for sustainable development under the United Nation’s 2030 agenda, growth in the Asia Pacific region should rely less on foreign trade and instead build up on domestic and regional demand, the United Nations Economic and Social Commission for Asia and the Pacific  (UN ESCAP) said in a report launched yesterday.

In its Economic and Social Survey of Asia and the Pacific 2016, ESCAP said now is the proper time for the region to evaluate its development strategy as the economies of developed nations—its main export market—remains sluggish and growth in China, the engine of economic expansion in the region, moderates.

“With the center of economic gravity continuing to move eastwards, it is time for the Asia Pacific region to adopt a development model that relies more on domestic and regional demand that, among other things, nurtures inclusiveness, equality and social stability,” the regional development arm of the United Nations noted in the report.

To do this, the Asia Pacific region must use as leverage its expanding middle class and young workforce. Governments, however, must provide an enabling environment for growth through greater investment in human capital, infrastructure, provision of employment opportunities, and efficient and fair taxation system, among others.

“A productivity-driven, wage-led approach would enable countries to increase their aggregate supply and their aggregate demand, thereby enhancing the well-being of their societies,” ESCAP said.

The region’s economy is expected to grow 4.8 percent to five percent in 2016 and 2017, respectively, already considering marco economic risks that include the moderation of the Chinese economy, slow recovery in the global economy, weak consumption and investment trends in the region, and an “ambiguous path” of interest rate increase by the US.

To boost productivity in the region, ESCAP said several countries in the region should not be too keen on “de-industrializing too early in their development.”

The study said agriculture-based economies are shifting to a service-based economy before maximizing the wealth of the land.