Full Report - Subregional Office for East and North-East Asia - escap

INVESTING IN INCLUSIVE AND SUSTAINABLE DEVELOPMENT CHAPTER 4
Figure 4.13. Average real GDP growth, different simulation scenarios, 2013-2030
11
10
9
Baseline case
Small macro spillovers
Moderate macro spillovers
Large macro spillovers
8
7
6
5
4
3
2
China
India
Indonesia
Malaysia
Philippines
Russian
Federation
Thailand
Percentage of GDP
Turkey
Source: ESCAP, based on the Oxford Global Economic Model.
Individual earnings in real terms would typically
improve as public services are universally provided.
Overall, the analysis in this section offers some
encouraging messages. The future public debt paths
for several Asia-Pacific economies seem sustainable
if additional public spending is accompanied by
stronger macroeconomic fundamentals, such as
higher labour force participation rates, accelerated
earnings and investment growth, and improved total
factor productivity. While some economies will need
larger macroeconomic-spillover effects than others, it
is important to note that the assumed magnitude of
improvements in the macroeconomic variables is not
unrealistically ambitious, and should be achievable
given the countries historical experiences.
For example, alongside the assumptions made
on other macroeconomic variables, annual private
domestic investment growth would need to reach
10.1% in Malaysia for debt to be sustainable in
the future (“large macro spillovers”). This rate is in
fact lower than that what was achieved during the
period 2010-2012 (11.6%) and well below the rate
observed in the decade prior to the Asian economic
crisis of 1997-1998 (18.7%).
Similarly, for debt to be sustainable in the Philippines,
individual earnings growth is assumed to range
between 8.5 and 12.5% per year during the period
to 2030 under the “large macro spillovers” scenario.
This is far lower than the annual pace of 14.5%
observed in the 1990s.
The policy implications are clear: a shift towards
inclusive and sustainable development needs to
focus on initiatives that help to enhance the potential
growth to avoid public debt distress. Even the
“moderate macro spillovers” scenario may not deliver
desired outcomes in the long run in all economies.
Government programmes need to be more qualityfocused
and growth-enhancing.
Among other things, this means, for instance, that
education curricula must be relevant to countries so
that students can learn to innovate and translate
their human capital into higher wages. Similarly,
health-care services must be adequate to keep the
labour force productive. At the same time, energy
sector development should help a country enhance
its production efficiency and reduce its reliance on
imported and traditional energy.
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