Forward-looking Macroeconomic Policies For Inclusive and Sustainable - - PowerPoint PPT Presentation

Anis Chowdhury

Director, Macroeconomic Policy and Development Division, UN-ESCAP EGM, UN-DESA 5-6 Dec. 2013

Forward-looking Macroeconomic Policies For Inclusive and Sustainable Development

Why forward-looking macro policies?

“… forward-looking macroeconomic policies … promote sustainable development and lead to sustained, inclusive and equitable economic growth, increase productive employment

• pportunities and promote agricultural

and industrial development” (Rio +20 Outcome document, para150)

2 Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

What are forward-looking macro policies?

• Safeguard the sustainability of public investment strategies
• Not focus narrowly on debt stabilization and curbing inflation
• Relax unnecessarily stringent fiscal and monetary restrictions
• Use countercyclical fiscal and monetary policies
• Strengthen mobilization of domestic resources
• Enhanced international cooperation to strengthen tax revenue

collection Objectives:

• Supportive of growth of real output and employment.
• Minimize the impact of external and other shocks on poverty
• Buttress the fiscal capacities of all Governments

(SGR 2010: Keeping the Promise, para 50)

3 Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Development experience of the 1990s

• “Macroeconomic policies improved in a majority of

developing countries in the 1990s, but the expected growth benefits failed to materialize… forecast. In addition, a series of financial crises severely depressed growth and worsened poverty . . . [B]oth slow growth and multiple crises were symptoms of deficiencies in the design and execution of the pro-growth reform strategies … with macroeconomic stability as their centerpiece.” (World Bank’s Lessons from the 1900s, 2005, p. 95)

4 Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Conventional macroeconomic policies

Water intensity

5

Debt and macro instability Inflation and growth

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Public expend & human development

6

Social protection spending versus human development

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Taxation and inequality

7 ZAF YEM VNM USA UKR TUR TJK THA SYC SWZ SWE SVN SVK SRB SLV RUS ROU PRY PRT POL PER NOR NLD MYS MNG MKD MEX MDV MDA MAR LVA LUX LTU LSO KAZ JOR JAM ITA ISR IRN IRL IND HUN HRV HND GRC GEO GBR FRA FIN EST ESP EGY DNK DEU CZE CRI COL COG CHN CHL CHE CAN BTN BRA BOL BLR BIH BGR BEL AZE AUT AUS ARM ARG ALB y = -0.3017x + 44.964 R2 = 0.0592

10 20 30 40 50 60 70 10 20 30 40 50

General government taxes over GDP (per cent)

Gini coefficient

Developmental fiscal policies

• ..fiscal policy serves both as an instrument of macroeconomic stabilization

and as an instrument to achieve growth and poverty reduction objectives.

• …stability is necessary for growth, it is not sufficient.
• The fiscal deficit is a useful indicator for purposes of stabilization…, but it
• ffers little indication of longer term effects on government assets or on

economic growth.

• The design of fiscal policy … requires that attention be focused on the

likely growth effects of the level, composition and efficiency of public spending and taxation.

• Fiscal policy that neglects these effects runs the risk of achieving stability

while potentially undermining long-term growth and poverty reduction.

IMF-World Bank Development Committee (2006), "Fiscal Policy for Growth and Development: An Interim Report." DC2006-0003, April 6 (p. i)

8 Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Asia-Pacific perspectives

9

Yet, economic insecurity is prevalent, as

• 762 million live on less than $1.25 a day
• 924 million live on between $1.25 and $2 a day
• 544 million are undernourished.
• 1.1 billion workers are in vulnerable employment.

Asia-Pacific has been the fastest growing region.

• Sustained output growth has

halved the proportion of people living on less than $1.25 per day in the region from 52% to 19% between 1990 and 2010.

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Growing inequalities

10

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Inequalities & macro instability

11 Gini-CAD

• 30.00
• 20.00
• 10.00

0.00 10.00 20.00 30.00 40.00 25.0 30.0 35.0 40.0 45.0 50.0 55.0 Gini C A D / G D P ( % )

Gini-DebtHH

0.00 20.00 40.00 60.00 80.00 100.00 25.0 35.0 45.0 55.0 Gini H H D / G D P ( % )

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Proposed policy package

• A job guarantee programme
• 100 days per year for participants
• A universal, non-contributory pension
• For all aged 65 or older
• Benefits to all persons with disabilities
• For all aged 15 65
• Increasing the share of public health expenditures
• 5% of GDP by 2030
• Universal enrolment in primary and secondary education
• Primary by 2020 and Secondary by 2030
• Energy access to all
• Modern energy services by 2030
• Illustrative package of policies to promote inclusive and

sustainable development in 10 Asia-Pacific countries

12

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Investing in inclusive and sustainable development

13

Overall public expenditure and investment requirements to implement such a policy package vary across countries Total investment needs of above package of policies 5% to 8% of GDP by 2030 Public investment needed to deliver policies to sustain growth and promote inclusive and sustainable development

• In the case of China, the cost of the package is

projected to reach 3.3% of GDP in 2020 and 5.2% of GDP by 2030

• The cost of the package is projected to exceed

10%

• f GDP by 2030 only in Fiji (13%) and

Bangladesh (22%

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Doable and economically sustainable

Most countries can self-finance

• broadening tax bases,
• tax regimes more progressive,
• tax administration more efficient
• tighter regulations on capital flights
• fighting corruption
• reducing non-development expenditures

LDCs would need global partnership and development cooperation Will not jeopardize macroeconomic stability

14

Forward‐looking Macroeconomic Policies for Inclusive and Sustainable Development

Key messages

New paradigm that emphasizes the developmental role of macroeconomic policies. Grow now, distribute + clean up later is a dead end! Investing in social and environment pillars will strengthen the economic pillar… …and lead to sustained, inclusive and equitable economic growth. It is doable without jeopardising macroeconomic stability in a broader sense

15

Thank you

Visit ESCAP website

http://www.unescap.org/pdd/publications/survey2013/download/Economic-and-Social- Survey-of-Asia-and-the-Pacific-2013.pdf