Developing Asia needs a deep, robust financial sector to sustain growth

Apr 7, 2015

New York—The newly released Asian Development Outlook 2015 report– ”Financing Asia’s Future Growth” analyses the trends and challenges of financing for the Asia-Pacific region, which is extremely timely and relevant for the broader ongoing inter-governmental discussion, both on Financing for Development and on post-2015 Development Agenda.

According to the report, Developing Asia will grow steady at 6.3 per cent in 2015 and 2016 supported by a strengthening recovery in the major industrial economies and soft global commodity prices. Low oil prices in Asia have been an opportunity for fiscal reforms as it slows inflation, but the report warns that a sudden sharp reversal could undermine the outlook and require policy response. The report further states that Developing Asia needs a deep, robust financial sector to sustain growth and, most importantly, financial stability must be maintained to enhance growth and equity.

UNDP and the Asian Development Bank (ADB) hosted a symposium around the key findings of the report, which is expected to contribute to discussions around the upcoming Third International Conference on Financing for Development in Addis Ababa, Ethiopia this July and the UN Summit to adopt the post-2015 development agenda in New York this September, where a proposed set of Sustainable Development Goals are expected to be adopted.

Chairing the symposium, Magdy Martínez-Solimán, UNDP’s Director of Bureau for Policy and Programme Support said, “This symposium is timely and important. The Addis Ababa conference represents an opportunity for donor countries to reaffirm their longstanding commitment, however, the post-2015 agenda cannot be achieved through aid alone. We need to think anew about how we approach the challenge of financing development. And we need to think big.”

“Financing for development in the post-2015 era cannot be considered only in the context of ‘stable times;’ there are fewer of them and we have to recognize that volatility is becoming the new normal,” Martínez-Solimán said. “This is particularly relevant to Asia, a region especially vulnerable to extreme climate events. But there are many sources of risk beyond disasters, with the costs of shocks as diverse as conflict and disease outbreaks high and increasing. And, of course, we continue to face recurrent economic crisis

Assistant Secretary-General of the UN Department for Economic and Social Affairs, Mr. Lenni Montiel said promoting inclusive financing requires special efforts for least developed and developing countries.

The UN Ambassadors of Bangladesh, Nepal and Indonesia highlighted country specific challenges with urgent need for reform at home and recovery in finance. Foreign investment flows, incentives for private sector and strong financial sectors in countries were seen as vital alongside public private partnership, domestic resource mobilization, taxation and remittances, to meet long-term development goals.

“Developing Asia is making a strong contribution to global economic growth,” said ADB Chief Economist Shang-Jin Wei. “With improving external demand for the region’s outputs, an expected pickup in India and in most members of the Association of Southeast Asian Nations (ASEAN), could help balance gradual deceleration in China, the region’s largest economy.”

Martínez-Solimán said, “Today 2.5 billion adults - more than half of the world’s working adults - are excluded from formal financial services. This is most acute among low-income populations in developing countries, where approximately 80 per cent of poor people do not have access. It is now well-established that giving low-income households access to formal financial services can help reduce poverty and inequality. We need to ensure access to appropriate financial services and delivery channels, strengthen financial competencies and consumer empowerment, as we consider the importance of financial systems to help finance the post-2015 agenda”.

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