The outlook for developing
The global environment and domestic vulnerabilities, however, still pose risks to the region's prospects. In the face of faster-than-expected interest rate hikes in the
“Sound policies and a gradual pickup in global economic prospects have helped developing
Growth in the region will continue to be driven by strong domestic demand, including public, and increasingly private, investment. This trend will also be supported by gradually rising demand for exports, as emerging markets and developing economies recover. The slow pace of recovery in commodity prices will benefit commodity exporters in the region, but won't unduly hurt the economies of commodity importers in
The large developing economies in the
The region's smaller economies will generally benefit from the continued vitality of their larger neighbors, and some will also benefit from higher commodity prices.
“Despite favorable prospects, the region's resilience depends on policy makers taking account of, and adjusting to, significant global uncertainties and domestic vulnerabilities,” said
The report calls for macroeconomic prudence to address the significant risks to the region's economic prospects. Across the region's large economies, increasing fiscal revenues can help governments finance programs that boost growth and foster inclusion while reducing risks to fiscal sustainability, the report says. Some smaller commodity-exporting economies will need to take steps to increase their fiscal solvency. With rising inflation – albeit from a low level – and potentially more volatile capital flows, the report says policy makers in much of the region should consider adjusting their accommodative monetary policies.
The longer-term challenge for the region lies in sustaining rapid growth while ensuring greater inclusion. Governments can address these challenges by increasing productivity and investment, which have slowed recently in several economies, as well as by improving the quality of public spending.
In the face of rising protectionism outside the region,
In addition, the report says policy makers can put future economic prospects on a more sustainable path if they take steps to reduce pollution caused by farming, a rising threat amid the intensification of agriculture in the region.