ADB Urges Governments to Use Fiscal Policy to Advance Inclusive Growth

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The Asian Development Bank (ADB) has urged governments to proactively use fiscal policy to close gaps and promote more inclusive growth as widening income gaps are undermining the successful poverty reduction in Asia. Fiscal policy can and should play a bigger role in promoting inclusive growth in Asia, said ADBs Deputy Chief Economist Juzhong Zhuang. Asian policy makers must act now to integrate inclusion targets into their budget planning to transition to a path where the benefits of growth are broadly shared. The ADBs Asian Development Outllok 2014 report noted that during the 1990s and 2000s, more than 80% of the regions population lived in countries with worsening Gini coefficients, a common measure of inequality. The same market forces that have enhanced growth in the region globalization, technological progress, and market reform now exacerbate inequality. The international experience shows that public spending can reduce income inequality. Government spending on education and health care, for example, broadens access for the poor to these vital services and helps level the playing field, the report said. Making infrastructure affordable and accessible allows the poor to take better advantage of the opportunities that come with improved education and health. However, developing Asia lags other regions in public investment to promote equity. Public spending on education averages 2.9% of gross domestic product (GDP) in the region compared to 5.3% in the advanced economies, and 5.5% in Latin America. The difference is starker for health care: 2.4% in Asia versus 8.1% in advanced economies, and 3.9% in Latin America. …