Expert urges policy reforms amid high borrowing costs, fiscal pressures in Asia

High borrowing costs and fiscal pressures are affecting long-term financing in the Asia-Pacific region, underscoring an urgent need for policy reforms.

This issue was addressed during a virtual policy dialogue hosted by the Philippine Institute for Development Studies (PIDS) and the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP).

Michal Podolski, chief economic affairs officer at UN ESCAP, presented key findings from the 2024 ESCAP Economic and Social Survey, shedding light on the region’s ongoing challenges in the post-pandemic era.

“After the COVID pandemic, we have seen a persistent decline in purchasing power, rising poverty and widening socioeconomic inequalities,” Podolski said.

The survey highlights that the COVID-19 pandemic led to a permanent reduction in GDP growth rates, with many regions now experiencing lower growth rates of 1 percent to 2 percent compared to the pre-pandemic average of around 6 percent.

Inflation also rose, now hovering around 4 percent to 5 percent compared to the pre-pandemic norm of 3 percent to 3.5 percent.

Podolski said that while the growth rate in the Philippines decreased from 6 percent to 7 percent to 5 percent to 6 percent, it remains relatively strong compared to other regions.

The country also maintained a more favorable inflation path and minimal impact on low-income households. However, rising poverty and inequality persist, with a notable increase in income disparity among the top 10 percent of earners.

Podolski said governments are facing increased borrowing costs and shorter loan maturities, complicating the financing of essential public services such as education, healthcare, and social protection.

“The cost of borrowing is still high in many countries, and this poses a serious constraint on long-term investments needed to meet the Sustainable Development Goals,” Podolski said.

He said global megatrends such as demographic shifts, climate change and technological advancements are reshaping the fiscal landscape, affecting revenues and expenditures and influencing long-term borrowing costs.