(Roundup) Asia-Pacific developing economies to grow 5.8% in 2015: U.N.

January 13, 2015 11:55 pm 

BANGKOK, Jan. 13 — Developing countries in Asia and the Pacific are forecast to grow at an average of 5.8 percent in 2015, up from 5.6 percent in 2014, the United Nations (U.N.) said here on Tuesday.

This will be driven by improved performances in a number of major developing economies, including Bangladesh, India, Indonesia, Papua New Guinea, South Korea and Thailand, the U.N. Economic and Social Commission for Asia and the Pacific (ESCAP) said in its Economic and Social Survey of Asia and the Pacific 2014: Year-end Update.

Prospects for some of these economies will be aided by the progress in implementing structural reform programs in 2015, which are expected to improve the domestic business environment, the report said.

Growth in China is forecast to hover around 7 percent in 2015 consistent with the ongoing economic rebalancing, it said.

Regional inflation is likely to remain relatively subdued in 2015, falling to 3.5 percent from 3.9 percent in the previous year, which offers room in some economies for loosening monetary policies to support growth, the Year-end Update indicated.

"Despite improved prospects, many developing economies in the region face structural constraints which have kept them from realizing their growth potential. Infrastructure shortages remain acute and growth has not translated into enough decent jobs," United Nations Under-Secretary-General and ESCAP Executive Secretary Shamshad Akhtar said.

Infrastructure deficits and lack of availability of decent jobs are the main domestic structural concerns which are impeding the supply potential of economies, the report showed.

Also, likely capital volatility in 2015 stemming from monetary policies of developed economies may affect macroeconomic stability and investment in the region, according to ESCAP analysis.

"The impact may negatively affect GDP growth of some countries in the region by up to 0.7 percentage points," the report said.

The ESCAP recommended using a variety of measures to tackle capital volatility, including ensuring good macroeconomic fundamentals, judicious foreign exchange intervention, and use of macro-prudential policies to encourage entry of long-term capital.

In addition, the ESCAP predicted that the steep decline in oil prices would have varying impacts on balance of payments, inflation and fiscal space of countries.

For energy-importing countries, a US$ 10 per barrel fall in the oil price in 2015 would translate into an increase in GDP growth of up to 0.5 percentage points, it said.

However, this could reduce growth in Russia, a net energy exporter, by 1.1 percentage points and deprive neighboring Central Asian countries of US$ 1.7 billion in remittances from nationals working in the Russian Federation, it added.

The ESCAP regarded declining global oil prices as "a valuable opportunity for Asia-Pacific economies to reduce fuel subsidies that account for a large share of national budgets in many countries in the region."

Regressive fossil fuel subsidies more often benefit the rich and have little impact on reducing poverty, the report said, adding that the savings from a cut in these could be better invested into more productive and inclusive development.

ESCAP estimated that savings from energy subsidies could, for example, finance the provision of income security to all elderly and persons with disabilities as well as universal access to health and education in Indonesia, Malaysia, the Philippines and Thailand.

"This is a particularly critical and opportune time to decrease subsidies," the ESCAP Executive Secretary said, noting that this would not only reduce budgetary strains but also prepare governments for the near future when global financing may be even more challenging to secure.

"Reducing subsidies can raise significant public financial resources for productive investment in the region and could make needed funds available for financing sustainable development," Akhtar said. (PNA/Xinhua)

LGI/SSC

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