## Executive Summary

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**Canonical URL:** [Executive Summary](https://www.imf.org/-/media/files/publications/reo/apd/2017/areo0517exesum.pdf)

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### Outlook and near-term risks
- The outlook for the Asia-Pacific region remains robust—the strongest in the world—and recent data point to a pickup in momentum.
- The near-term outlook is clouded with significant uncertainty, and risks, on balance, remain slanted to the downside.
- Near-term risks highlighted:
  - Tighter global financial conditions triggering capital flow volatility interacting with balance sheet weaknesses.
  - More inward-looking policies in advanced economies, which would significantly impact Asia given the region’s trade openness.
  - A bumpier-than-expected transition in China with large spillovers.
  - Geopolitical tensions and domestic political uncertainties affecting various countries.

### Growth projections and recent momentum
- Growth is forecast to accelerate to 5.5 percent in 2017 from 5.3 percent in 2016.
- Growth in China and Japan is revised upward for 2017 compared to the October 2016 World Economic Outlook, owing mainly to continued policy support and strong recent data.
- Growth is revised downward in India due to temporary effects from the currency exchange initiative and in Korea owing to political uncertainty.
- Forward-looking indicators such as the Purchasing Managers' Index suggest continued strength in activity into early 2017.
- Over the medium term, slower growth in China is expected to be partially offset by an acceleration of growth in India, underpinned by key structural reforms.

### Chapter 2 — Demographic challenges
- Parts of Asia risk “growing old before becoming rich.”
- The speed of aging is especially notable compared to the experience in Europe and the United States.
- For many countries in the region, on current trends, per capita income (benchmarked against the United States) will be much lower than that reached by most advanced economies at a similar peak in their aging cycle.
- The drag on future growth from aging could be significant especially in relatively old Asian countries.
- Policy implications: adjust macroeconomic policies early to safeguard debt sustainability and implement reforms focused on protecting vulnerable elderly and raising labor force participation (especially for women and the elderly).

### Chapter 3 — Productivity dynamics
- Productivity growth has slowed since the global financial crisis, with limited catchup (“convergence”) toward the United States and other countries at the technological frontier.
- The slowdown has been most severe in the advanced economies of the region and in China.
- Contributing factors include sluggish investment, little impetus from trade, slowing human capital formation, reallocation of resources to less productive sectors, and population aging.
- Without reforms, productivity growth will likely remain low for some time, with headwinds from rapid aging becoming increasingly important.
- Empirical results emphasize the importance of openness and foreign direct investment (FDI) in boosting productivity, particularly for emerging and developing economies.

### Policy recommendations — macro stance and financial stability
- Monetary policy:
  - Should generally remain accommodative given that inflation is below target and there is slack in most economies in the region.
  - Some central banks should stand ready to raise the policy rate if inflationary pressures gather pace.
  - Some central banks need to tighten macroprudential settings and gradually raise interest rates to slow credit growth.
- Fiscal policy:
  - Should support and complement structural reforms and external rebalancing, where needed and fiscal space is available.
  - Countries with closed output gaps should start rebuilding fiscal space.
  - Delivering on medium-term fiscal consolidation plans is critical in some countries, especially where debt levels are high and fiscal credibility needs to be enhanced.
- Macroprudential and exchange rate frameworks:
  - Address vulnerabilities while safeguarding against external shocks to preserve financial stability.
  - Exchange rate flexibility should generally remain the main shock absorber against sudden tightening in global financial conditions or a shift toward protectionism.
  - Policymakers should continue to rely on macroprudential policies to mitigate systemic risks associated with high corporate and household leverage and rising interest rates, while over time addressing underlying balance sheet vulnerabilities.
  - Macroprudential policies could also be used to increase resilience to shocks, including shocks associated with reversal of capital flows.

### Structural reforms for sustained long-term growth
- Priority reforms to address demographic transition and boost productivity:
  - Labor market and pension system reforms.
  - Policies to protect the vulnerable elderly.
  - Policies to raise labor force participation (especially for women and the elderly).
  - Measures to boost absorptive capacity and domestic investment to capitalize on increased FDI inflows in emerging and developing economies.
  - For advanced economies: strengthen the effectiveness of R&D spending, raise productivity in services sectors, and support trade integration and liberalization in services.
- The appropriate policy mix varies across economies depending on output gaps, policy space, reform priorities, and the need for external rebalancing.

### Key statistics and exact figures cited
- Growth forecast: 5.5 percent in 2017.
- Prior year growth: 5.3 percent in 2016.

*Source: Executive Summary, areo0517exesum*

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_Source: https://www.imf.org/-/media/files/publications/reo/apd/2017/areo0517exesum.pdf_