The Other Rebalancing: Asia’s Quest for Inclusive Growth
IMF Blog, October 17, 2011
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- Authors: Anoop Singh
- Published: October 17, 2011
Poverty reduction and inequality trends
- Growth in most Asian economies over the past two decades has been impressive and higher on average than in other emerging regions, translating into significant reductions in poverty.
- Asia still remains home to the largest number of the world’s poor.
- Inequality across the region has increased over the same two decade period, reversing a previous three-decade record of equitable growth in Japan, the newly industrialized economies (NIEs), and the Association of Southeast Asian Nations (ASEAN).
- The rise in inequality in Asia has been much more pronounced than in most other emerging regions, leaving parts of Asia:
- less equitable than the Middle East, and
- approaching levels of inequality in Sub-Saharan Africa and Latin America.
- Rising inequality has dampened the impact of Asia’s fast growth on poverty reduction; in many countries the gap between rich and poor has been growing.
Inclusiveness of growth across countries
- Our analysis confirms that growth has been significantly less inclusive in many Asian economies.
- Income dynamics by region/group:
- The income of the bottom fifth of the population has grown much more slowly than average incomes in China, the NIEs, and South Asia (excluding India).
- In India and the ASEAN countries, incomes of the poorest fifth have kept pace with average income growth.
- In Brazil, the poorest fifth have seen their incomes rise even faster than average.
Policy challenge and fiscal policy options
- Evidence of the importance of greater income equality for sustained growth makes inclusive growth a priority in regional economic assessments and policy dialogue.
- The problem is complex and will likely require a set of mutually reinforcing policies; the necessary mix will vary from country to country.
- Fiscal policy areas highlighted:
- The relatively low share of education and health spending in GDP across Asia points to an important potential role for fiscal policy in strengthening inclusiveness.
- Conditional cash transfer programs (CCT) are being increasingly used in low-income emerging economies; in Asia, the introduction of a CCT in the Philippines is noted as a welcome development.
- By 2012, this program is budgeted to cover 60 percent of the poor.
Safety nets, costs, and additional reforms
- Many emerging Asian economies lack unemployment insurance schemes and have low pension coverage rates:
- Less than 20 percent of the working age population is covered in most of emerging Asia compared with an average of 60 percent in OECD countries.
- Enhancing safety nets would help by:
- increasing inclusiveness, and
- reducing precautionary motives to save, hence increasing consumption and facilitating global rebalancing.
- Fiscal cost considerations:
- The Bolsa Familia program in Brazil only costs 0.4 percent of GDP.
- Recent IMF work on China and Korea argues that a minimum social safety net can be provided at low cost.
- Thus, in at least some cases, policies to promote more inclusive growth need not be prohibitively expensive.
Broader strategy and conclusions
- Reforms to social protection schemes, and health and education investment, could be key elements of a broader strategy to reduce the share of vulnerable households in Asia.
- Such a broader strategy might also include labor, financial, exchange rate and governance reforms.
- Ultimately, rebalancing the benefits of Asia’s fast growth to make it more inclusive may hold the key to sustaining that growth in the years ahead.
The Other Rebalancing: Asia’s Quest for Inclusive Growth — Anoop Singh, October 17, 2011.
Content in this bundle
- iMFdirect 博客: 另一种调整, 亚洲寻求包容性增长之路, 2011年10月17日
- もう一つの再調整: アジアの包括的成長を求めて, 2011年10月17日
- Iii. Asia'S Quest for Inclusive Growth