Asian Development Outlook 2014: Fiscal Policy for Inclusive Growth

This report provides an analysis of Asia’s economic performance in 2013 and offers forecasts for 45 economies in Asia and the Pacific. It looks at the role of fiscal policy in reversing widening inequality in developing Asia. It recognizes that, as emerging demographic and environmental challenges are expected to compete for public resources in the years ahead, regional governments will need to explore options for mobilizing revenue as they build equity objectives into fiscal plans. Key messages include:

• Major industrial economies - the US, euro area members, and Japan - grew by a collective 1.0% in 2013. The momentum is expected to quicken to 1.9% in 2014 and 2.2% in 2015;
• Soft global commodity prices continue to lighten pressure on consumer prices, allowing inflation to ease to 3.4%;
• For resource-dependent economies, commodity price swings matter more than volatile capital flows;
• Public spending on education, health care, and direct transfers can contribute to equity, but Asia underspends when compared to not only the advanced economies in these areas but also to its peers in Latin America;
• Strategic planning and innovative policies can contribute to more inclusive fiscal policy in Asia.