Managing Stability,

Strengthening Structural Reform

Armida Salsiah Alisjahbana

Under-Secretary-General of the United Nations and Executive Secretary of ESCAP

Tuesday, 31 August 2021

The Congress of the Indonesian Economics Association
1
Overview
Economic ‘in’stability: selected challenges
From stability to structural reforms
Recovering better together
UN ESCAP’s policy support and advisory

2
1. Economic ‘in’stability:
Selected challenges in the Asia-Pacific region

3
 5,7

2016
5,9

2017
5,3

2018

Source: ESCAP estimates

economy

4,2

2019
-1,0

2020
5,9

2021
GDP growth (%) in developing Asia and the Pacific

5,0

2022
100%

50%

China
Republic of Korea
Mongolia

Uzbekistan
Russian Federation
Kazakhstan
Georgia
Kyrgyzstan
Armenia

Papua New Guinea

Solomon Islands
The pandemic devasted the regional

Vanuatu
Samoa
Fiji

Bangladesh
Sri Lanka
Pakistan
India
Nepal
Maldives

Viet Nam
Indonesia
Thailand
Forecasted 2022 economic output as a share of 'potential' 2022 output

Malaysia
Cambodia
Myanmar
4

Philippines

Developing ESCAP…
 …with significant socio-economic costs
Equivalent number of full-time jobs lost in 2020 Post-Pandemic increase in poverty
(millions of jobs, 48 hours/week) (Asia-Pacific, millions of persons)

160 200 $1.90 per day

140 180 $3.20 per day 172
140
$5.50 per day 158
160
120
140
100
120
80
80 100 89
80
60
60
40 35
40
24
20
20
1
0 0
Asia-Pacific East Asia South-East Asia South Asia Pacific Post-pandemic increase 2020

Source: ESCAP estimates

Source: ESCAP, based on ILO (2021)
5
Rethinking the economic
paradigm
The pandemic has exposed inherent vulnerabilities in our economies to
non-economic shocks, leading to significant disruptions and instability

A recovery in economic growth alone would not make our economies more
stable and sustainable in the long term

We need to create a future growth model which is more resilient to shocks

by focusing on the quality of economic growth and its integration with
social development and environmental sustainability objectives

This will involve transforming the economies structurally to make growth

more socially equitable and green, including through harnessing the power
of digitalization for good while mitigating any negative aspects
6
 Maintaining stability in post-pandemic
adaptations and transitions
So, three sets of policy challenges for maintaining stability during the post-
pandemic recovery and economic transformation.
▪ Widened inequality gaps that
threaten social cohesion &
stability

▪ Structural disruptions caused by

post-pandemic transformations

▪ The impact of digitalization

on economic opportunity and
human capital formation
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2. From stability to structural
reforms:
Key elements and policy simulation results

8
From Instability to Reforms

Integrated ESCAP Framework

Focus Public Health Recover Better Together

Inclusive Resilient Sustainable

Vaccination, diagnostics, •Trade-value chain • Green-blue

• Social protection
therapeutics: • Transport-transit recovery
Priority areas • Health care access
• Climate action
multilateralism (regional • Human resources •Disaster- pandemic
warning • Energy transition
health cooperation)

Mainstreaming
actions Finance Digitalization

9
Lesson from the COVID-19 pandemic
The pandemic has taught us that countries in the Asia-Pacific region
can no longer put off protecting development gains from adverse
shocks, making development inclusive.

The socio-economic impact of the COVID-19 pandemic was amplified

due to lack of resilience and investments in people and the planet

Continuity in policy support is a must and recovery policy packages

should focus on sustainability in line with the Paris Agreement and
investing in the 2030 Agenda.
10
Therefore, the region needs a transformation towards
inclusive, resilient and green economies
Policy Package

ESCAP, 2021
11
So, the pandemic provides a valuable opportunity for
change
Percent of GDP
Above the line measures Liquidity support
Below the line
measures: equity
Additional spending or foregone Accelerated injections, loans,
revenues spending / asset purchase or
deferred debt assumptions. Contingent liabilitie
Non- revenue
Health Quasi-
Subtotal health Subtotal Guarantees
sector opera
sector
Indonesia 4.5 1.8 2.7 0.9 0.2 0.6
G20:
Emerging 4.3 0.9 3.4 1.2 3.3 0.5 2.3 1.
markets
G20:
Advanced 12.9 2.1 10.9 1.4 14.8 1.3 10.8 10
economies

Source: IMF Fiscal Monitor Database of Country Fiscal Measures in Response to the COVID-19 Pandemic, accessed on 15 Aug 2020 12
 …and greener
Committed fiscal funds by energy type Number of policy responses that hinder green recovery
7
Australia (4.6)

Number of policy measures

6
Bangladesh (0.1)
5
China (59.8)
4
India (135.7)
3
Indonesia (6.8)
2
Japan (20.8)
1
New Zealand (2.6)
0
Republic of Korea (6.3)

China

Turkey
India

Japan

Philippines

Russian Federation
Indonesia

Singapore
Australia

Republic of Korea
Russian Federation (5.2)

Turkey (14.2)

Viet Nam (0.5)

0 20 40 60 80 100
Share in total public fund commitments to energy (percentage)
Subsidies or tax reductions for environmentally harmful products
Environmentally related bailout without green strings
Clean unconditional Clean conditional Fossil unconditional
Deregulation of environmental standards
Fossil conditional Other energy Environmentally harmful infrastructure investments
Subsidies for environmentally harmful activities
13
 Percentage change Million persons

-8
-6
-4
-2

-20
-18
-16
-14
-12
-10
0

-5
0

-30
-20
-15
-10

-25
2020 2020
2021 2021
2022 2022
2023 2023
2024 2024
2025 2025
2026 2026
2027
2027
2028
2028
2029
2029
2030
2030
2031
2031
2032
2032 Carbon emissions
2033
Number of poor people

2033 2034
2034 2035
2035 2036
2036 2037
2037 2038
2038 2039
2039 2040

Ambitious Spending
2040

Average change
0
2
4
8

6
10
-1,0
-0,9
-0,8
-0,7
-0,6
-0,5
-0,4
-0,3
-0,2
-0,1
0,0

2020 2020
2021 2021
2022 2022
2023 2023
2024 2024
2025 2025
environmental benefits in South-East Asia…

2026 2026
2027 2027
2028 2028
2029
Business-as-usual spending

2029
2030 2030
2031
2031
2032
2032
Gini coefficient

2033
2033
2034
2034
Potential output level

2035
2035
2036
Such transformation offers notable socio-economic and

2036
2037
2037
2038
2038
2039
2039
2040
2040
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 Percentage change Million persons

-5
0
5

-35
-30
-20
-15

-25
-10
-8
-6
-4
-2

-12
-10
0

2020 2020
2021 2021
2022 2022
2023 2023
2024 2024
2025 2025
2026 2026
2027 2027
2028 2028
2029 2029
2030 2030
2031 2031
2032 2032
Carbon emissions

2033
Number of poor people

2033
2034
2034
2035
2035
2036
2036
2037
2037
2038
2038
2039

Ambitious Spending
2039
2040
2040
…as well as in Indonesia

Average change
Percentage change
-0,8
-0,7
-0,6
-0,5
-0,3
-0,2
-0,1

-0,4
0,0

-2
2
4
6
8

0
10
12

2020
2020 2021
2021 2022
2022
2023
2023
2024
2024
2025
2025
2026 2026
2027 2027
2028 2028
Business-as-usual spending

2029 2029
2030 2030
2031 2031
2032 2032
2033
Gini coefficient

2033
2034
Potential output level

2034
2035
2035
2036
2036
2037
2037
2038
2039 2038
2040 2039
2040
15
 Government debt-to-GDP ratio

40
45
50
55
60
65
2019

2020

2021

2022

2023

2024

2025
South-East Asia

2026

2027

2028

2029

2030

Government debt-to-GDP ratio

20
25
30
35
40
45
The fiscal cost is manageable

2019

2020

2021

2022

2023

2024

2025

2026
Indonesia

2027

2028

2029
16

2030
3. Recovering better together:
Policy considerations

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Building more inclusive societies: policy
considerations
Ensuring continuity in fiscal and financial support for vulnerable groups &
hardest-hit businesses until a robust recovery
▪ Putting people’s livelihood first
▪ Ensuring an inclusive access, with a focus on the poorest & most vulnerable

Promoting an employment-led recovery

▪ Providing targeted support for labor market recovery
▪ Investing in strategic industries
▪ Investing in physical infrastructure and the people (quality labor force)

Closing social protection coverage gaps

▪ Structural reforms to ensure that social spending is inclusive/progressive
▪ Strengthening resource mobilization & optimizing funding allocation
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Building more resilient economies: policy
considerations
Strengthen supply chains and connectivity, including through international
cooperation
Promote digital transformation

Diversify economies

Encourage high-skilled and high value-added sectors that could reach a

broader base of trade partners

Prepare for shifts in global value chains, such as diversification away from
China
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Building greener economies: policy
considerations
Embed long-term sustainability in COVID-19 policy response

Incorporate environmental sustainability into business

investment processes and analyses

Accelerate green public investment, including in clean energy

and climate-resilient infrastructure

Protect and restore biodiversity

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4. Selected ESCAP policy support and
advisory work

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ESCAP support for inclusive development
Comprehensive analytical reports
▪ 2018 Theme Study
▪ 2022 Economic and Social Survey (forthcoming)

Interregional projects
▪ Reducing inequality– innovative policymaking to leave no one behind (2018-2021)

Policy analysis tools Key SDGs:

▪ ESCAP Methodologies to measure inequality of
opportunities
▪ ESCAP Social Protection Simulation Tool

Asia-Pacific Information Superhighway (AP-IS)

▪ to reduce the digital divide & expand broadband
facilities across and within countries
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ESCAP support for resilience
GIS based mapping of vulnerable communities and disaster risks
Locate exactly where investments are crucial
Mapping critical infrastructure that serves the most vulnerable populations during disasters

Nepal Bangladesh 23
ESCAP support for green development
Marine plastic pollution in Indonesia
▪ Launched the “Closing the Loop” project in 2020 to plan for and manage plastic
waste using circular economy principles
▪ Pilot city: Surabaya
▪ A digital tool that helps local governments monitor plastic waste leakage and
identify “hot spots” for waste generation, through remote sensing, satellite and
crowdsourced data applications

National energy planning in Indonesia

▪ The Indonesia National Energy Policy 2014 targets a primary energy mix of 23%
new and renewable energy by 2025
▪ Together with the Indonesia National Energy Council, ESCAP launched a report
that offered measures to leverage the least-cost sustainable energy development

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