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Abstract

Growth in the Asia-Pacific region shows signs of improving as extreme risks emanating from advanced economies have receded and domestic demand remains resilient, supported by relatively easy financial conditions and robust labor markets. A small and gradual pick-up in growth to over 5¾ percent is projected in the course of 2013. Risks to the outlook from within the region, such as rising financial imbalances and asset prices in some economies, are coming clearer into focus. Although Asia’s banking and corporate sectors have solid buffers, monetary policymakers should stand ready to respond early and decisively to shifting risks, and macroprudential measures will also have a role to play. In many Asian economies, some fiscal consolidation could also rebuild the space needed to respond to future shocks and preempt potential overheating pressures from capital inflows. In particular, there is a growing need to make tax and spending policies more efficient. To sustain high growth rates and alleviate the “middle-income trap” across Emerging Asia, the policy agenda will vary by jurisdiction but will also often include strengthening infrastructure investment and reforming goods and labor markets.

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Shifting Risks, New Foundations for Growth
  • Abeysekera, A., and I. Dissanayake, 2012, “Revenue Mobilization Measures and Current Tax Issues, Sri Lanka,” presented at Third IMF-Japan High-Level Tax Conference for Asia and Pacific Countries, January 31–February 3, 2012.

    • Search Google Scholar
    • Export Citation
  • Agustina, C., J. Arze del Granado, T. Bulman, W. Fengler, and M. Ikhsan, 2008, “Black Hole or Black Gold? The Impact of Oil and Gas Prices on Indonesia’s Public Finances,” World Bank Policy Research Working Paper, No. 4718.

    • Search Google Scholar
    • Export Citation
  • Aiyar, S., R. Duval, D. Puy, Y. Wu, and L. Zhang, 2013, “Growth Slowdowns and the Middle-Income Trap,” IMF Working Paper No. 13/71 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
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    • Search Google Scholar
    • Export Citation
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    • Search Google Scholar
    • Export Citation
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    • Search Google Scholar
    • Export Citation
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    • Export Citation
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    • Export Citation
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    • Export Citation
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    • Export Citation
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    • Search Google Scholar
    • Export Citation
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    • Export Citation
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    • Search Google Scholar
    • Export Citation
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    • Export Citation
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    • Search Google Scholar
    • Export Citation
  • Frankel, J.A., C.A. Vegh, and G. Vuletin, 2011, “On Graduation from Fiscal Procyclicality,” NBER Working Paper No. 17619 (Cambridge, Massachusetts: National Bureau for Economic Research).

    • Search Google Scholar
    • Export Citation
  • Guimarães, R., and P. Rungcharoenkitkul (forthcoming), “Fiscal Policy in Asia: Is It Countercyclical? Is It Effective?IMF Working Paper (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Herd, R., S. Hill, and V. Koen, 2011, “Fiscal Prospects and Reforms in India,” OECD Economics Department Working Papers, No. 911 (Paris: OECD Publishing).

    • Search Google Scholar
    • Export Citation
  • Heston, A., R. Summers, and B. Alen, 2012, “Penn World Table Version 7.1,” Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania (November).

    • Search Google Scholar
    • Export Citation
  • Ilzetzki, E., E. Mendoza, and C. Végh, 2011, “How Big (Small?) Are Fiscal Multipliers?IMF Working Paper 11/52 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2004, “Public Investment and Fiscal Policy,” Paper prepared by the IMF’s Fiscal Affairs Department and Policy Development and Review Department in consultation with other departments and in cooperation with the World Bank and the Inter-American Development Bank. http://www.imf.org/external/np/fad/2004/pifp/eng/.

    • Search Google Scholar
    • Export Citation
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  • International Monetary Fund, 2011a, “Revenue Mobilization in Developing Countries,” Policy Paper (March). http://www.imf.org/external/np/pp/eng/2011/030811.pdf.

    • Search Google Scholar
    • Export Citation
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    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2011d, Regional Economic Outlook: Asia and Pacific (Washington, October).

  • International Monetary Fund, 2012a, “Philippines: Technical Assistance Report on Road Map for a Pro-Growth and Equitable Tax System,” IMF Country Report No. 12/60 (Washington, March).

    • Search Google Scholar
    • Export Citation
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  • International Monetary Fund, 2012c, “2012 Spillover Report,” IMF Policy Paper (Washington, July).

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    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 2013c, Fiscal Monitor (Washington, April).

  • Jha, S., S. Mallick, D. Park, and P. Quising, 2010, “Effectiveness of Countercyclical Fiscal Policy: Time-Series Evidence from Developing Asia,” ADB Economics Working Paper Series, No. 211 (Manila: Asian Development Bank).

    • Search Google Scholar
    • Export Citation
  • Jha, S., and B. Ramaswami, 2010, “How Can Food Subsidies Work Better? Answers from India and the Philippines,” ADB Economics Working Paper Series, No. 221 (Manila: Asian Development Bank).

    • Search Google Scholar
    • Export Citation
  • Johansson, Å., C. Heady, J. Arnold, B. Brys, and L. Vartia, 2008, “Tax and Economic Growth,” OECD Economics Department Working Papers, No. 620 (Paris: OECD Publishing).

    • Search Google Scholar
    • Export Citation
  • Kaminsky, G., C. Reinhart, and C. Végh, 2005, “When It Rains, It Pours: Pro-Cyclical Capital Flows and Macroeconomic Policies,” NBER Macroeconomics Annual Report 2004, Vol. 19, pp. 1182.

    • Search Google Scholar
    • Export Citation
  • Lane, P., and A. Tornell, 1999, “The Voracity Effect,” American Economic Review, Vol. 89, No. 1 (March), pp. 2246.

  • Leamer, E.E., 1978, Specification Search: Ad Hoc Inference with Nonexperimental Data (New York: Wiley).

  • Lim, C., F. Columba, A. Costa, P. Kongsamut, A. Otani, M. Sayid, T. Wezel, and X. Wu, 2011, “Macroprudential Policy: What Instruments and How Are They Used? Lessons from Country Experiences,” IMF Working Paper No. 238 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Magnus, J.R., O. Powell, and P. Prüfer, 2010, “A Comparison of Two Model-Averaging Techniques with an Application to Growth Empirics,” Journal of Econometrics, Vol. 154, pp. 13953.

    • Search Google Scholar
    • Export Citation
  • Manasan, R.G., 2011, “Assessment of the Impact of the Fiscal Stimulus, Fiscal Risk and Fiscal Transparency: The Philippines,” Chapter 6 in Assessment on the Impact of Stimulus, Fiscal Transparency and Fiscal Risk, ed. by T. Ito and F. Parulian, ERIA Research Project Report, No. 2010–1 (Jakarta: Economic Research Institute for ASEAN and East Asia). http://www.eria.org/publications/research_project_reports/assessment-on-the-impact-of-stimulus-fiscal-transparency-and-fiscal-risk.html.

    • Search Google Scholar
    • Export Citation
  • Mohommad, A., R. Anand, D. Coady, V. Thakoor, and J.P. Walsh, forthcoming, “The Fiscal and Welfare Impacts of Reforming Fuel Subsidies in India,” IMF Working Paper (Washington: International Monetary Fund).

    • Search Google Scholar
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