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India and China have been anchor of global economic stability, posing a positive outlook for developing countries in the Asia-Pacific region in 2017, a UN study said today.
Progressive tax policies alongside better and effective economic governance can help economies in the region widen inclusiveness and move decisively towards sustainable development, it said.
The high and steady economic growth in Asia-Pacific is led by India and China, according to the Economic and Social Survey of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
As an year-end update, the survey finds resilient domestic demand and policy support resulting region's developing economies growing at a steady pace of just below 5 per cent despite sluggish global economy and weak trade growth.
Launched in Bangkok by UN Under Secretary General and ESCAP Executive Secretary Shamshad Akhtar, the survey said there are some potential risks that should not be ignored.
"Bouts of financial volatility can re-emerge due to external policy uncertainties in major economies, including those related to the 'Brexit' negotiations in Europe and the new administration in the United States of America, as well as vulnerabilities on the domestic front, such as those on corporate and bank balance sheets," she said.
External demand is likely to remain weak, with trade protectionist measures and sentiments, which are already on the rise, resulting in prolonged weakness in global trade and a drag on productivity growth, Akhtar said. The report also pointed out rising income inequality arising out of non-translation of output expansion from globalisation and technology in recent years into commensurate rise in decent jobs in a number of Asia-Pacific countries. "Progressive tax policies can be particularly effective in nurturing a more balanced society and reducing extreme inequalities," Akhtar said. The Asia-Pacific region as a whole has one of the world's lowest tax revenues levels, at 17.6 per cent of GDP, with a relatively low share of direct taxes in the general tax mix. "The region undergoes further structural transformation, efforts to lift productivity and innovation should be matched by measures to enhance worker skills and social protection," the report said. Fiscal policy should play proactive role to support domestic demand and meet long term priorities, it said. Public infrastructure outlays are deemed particularly effective in addressing structural bottlenecks. It will help in the current environment of weak external demand, weak private investment, low borrowing costs and benign inflationary pressures, according to the survey. The UN body will explore role of better and more effective governance in improving development outcomes in its next such survey for Asia-Pacific in 2017, expected in April.