A recent major United Nations economic survey, released on Thursday, forecasts an acceleration in the country’s economic growth for both the current year and the next, with real GDP growth projected at two percent and 2.3 percent, respectively. The survey also anticipates a decrease in inflation from 26 percent in 2024 to 12.2 percent in 2025.
The 2024 Economic and Social Survey of the Asia-Pacific region, conducted by the UN Economic and Social Commission for Asia and the Pacific (UN-ESCAP), highlights challenges faced by the economy, including political unrest impacting business and consumer sentiment, as well as disruptions in agricultural production due to massive floods.
It acknowledges that agreements with the International Monetary Fund and assistance from countries like China, Saudi Arabia, and the United Arab Emirates have aided the economy in regaining some macroeconomic stability. The survey emphasizes ongoing fiscal adjustments to restore stability, such as removing subsidies for the power sector.
Despite moderate tax gaps, especially when measured as a share of current tax revenues, the survey suggests that better tax policies and administration alone may not bridge the significant development financing gaps in low-tax countries. It underscores the need for broader improvements in socioeconomic development and public governance alongside tax revenue enhancement.
The survey stresses the urgent need for affordable and long-term financing for developing Asia-Pacific countries, highlighting the dilemma they face between servicing debt at high-interest rates or investing in critical areas like education, health, and social protection.
To address these challenges, the survey recommends prioritizing development financing needs over political interests, improving lending capacities of multilateral development banks, and adopting a long-term perspective by credit rating agencies. It also advocates for stronger public revenue collection, digitalization of tax administration, policies to increase society’s willingness to pay taxes, and the development of more robust capital markets to unleash domestic savings for Sustainable Development Goals (SDG) investments.
UN Secretary-General Antonio Guterres emphasizes the unjust global financial architecture that hinders developing countries, leading to fiscal constraints, rising borrowing rates, and income inequality. He advocates strategic deployment of public debt to invest in SDGs, which can lower public debt as a percentage of GDP over the long term.
The survey notes a pickup in average economic growth in the developing Asia-Pacific region from 3.5 percent in 2022 to 4.8 percent in 2023, although this rebound is concentrated in a few large countries. It projects GDP growth to remain relatively steady but below pre-pandemic trends at 4.4 percent in both 2024 and 2025.
The text underscores the importance of a strong taxation system and efficient public spending for financing essential investments, as well as the necessity for borrowing to meet sustainable development investment needs. It also highlights the increasing role of private creditors, particularly bondholders, in providing external public debt in the region.
In conclusion, the survey emphasizes the importance of strengthening tax revenue collection, boosting domestic savings, and addressing macroeconomic fundamentals to manage government borrowing costs effectively and promote sustainable development in the Asia-Pacific region.
