Asian Development Outlook 2014: Fiscal Policy for Inclusive Growth
Developing Asia is expected to extend its steady growth. The region's growth is projected to edge up from 6.1% in 2013 to 6.2% in 2014 and 6.4% in 2015. Moderating growth in the Peopleâ€™s Republic of China (PRC) as its economy adjusts to more balanced growth will offset to some extent the stronger demand expected from the industrial countries as their economies recover. Risks to the outlook have eased and are manageable. The monetary policy shift in the United States (US) may invite some volatility ahead in financial markets, albeit mitigated by accommodative monetary policy in Japan and the euro area. The regional growth outlook depends on continued recovery in the major industrial economies and on the PRC managing to contain internal credit growth smoothly. Greater Public Spending Needed to Reduce Inequality Widening income gaps in developing Asia strengthens the case for greater use of fiscal policy to foster equality of opportunity. While the region has benefited from fiscal prudence in the past, demographic and environmental challenges are expected to compete for public resources in the coming years. To boost public spending on equity-enhancing programs such as education and health without undermining fiscal sustainability, the authorities will need to explore a wide range of options for mobilizing revenue and to build equity objectives into their fiscal plans.