Download 24. Growth and structural change

Statistical Yearbook for Asia and the Pacific 2014
24. Growth and structural change
Growth in the region, although higher than in other regions and the global
average, remains below pre-crisis levels
The Asia-Pacific region has been one of the
fastest growing regions in the world since the
1970s. The region grew at more than 4% on
average,1 compared with a global average of
3%, until the global financial and economic
crisis hit in 2008. Between 1970 and 2012, the
region’s real GDP rose from around $3 trillion
to over $16 trillion. Similarly, real per capita
income rose from $1,379 in 1970 to $3,947 in
2012.
During the same period, the region also
witnessed rapid structural transformation. For
example, the share of agriculture as a
percentage of regional GDP halved from 13.5%
in 1970 to 7% in 2012, and that of services rose
from 47% to 59%. The share of industry
dropped marginally during the same period
from around 40% to 34%. This shows the
classic pattern of structural change observed in
developed countries.
The average annual growth rate of the region
dipped to around 2.5% in the 1990s partly due
to the 1997-1998 Asian crisis. However, the
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region rebounded and grew at an average
annual rate of 4.5% until 2007, when the global
financial and economic crisis hit. While the
region took only two years to regain pre-crisis
growth rates after the 1997-1998 crisis, this
time it is taking much longer. Although the
region is driving the global recovery, its growth
rate still remains below its pre-crisis level —
that is to say, 3.9% during the period between
2008 and 2012, compared with 5.2% during the
period between 2001 and 2007.
Even when countries recover from a crisis and
attain pre-crisis growth rates of GDP, the crisis
causes permanent damage. For example, by
2003/04, Indonesia’s GDP recovered to the
level (about $247 billion) that existed in 1997,
although it would have been $396 billion had
there been no crisis and the economy continued
to grow at the pre-crisis rate of around 7%.
That is why it is important for countries to have
enough policy space to mitigate crises. It,
however, depends to a large extent on the fiscal
balance, as well as on the inflation rate.

The average annual growth rate of the Asia-Pacific region, although high compared with the
global and other regional averages, still remains significantly below the pre-crisis level.

During 2011-2012, there were significant subregional variations in growth rates — South-East
Asia and East and North-East Asia outperformed other subregions.

The Maldives, Mongolia, Papua New Guinea and Turkmenistan grew between 10% and 15%
during the period between 2010 and 2012. During the same period, Macao, China and Nauru
experienced growth rate of 15 and 17% respectively. 1 However, these countries and areas
have a narrow economic base and hence experienced large volatilities in their growth rates.

The aggregate growth figures do not shed much light on the quality of growth in terms of
social and environmental impacts of the growth process. Many countries in the region
experienced rising inequality and environmental damages during the growth process.

Although all countries have undergone significant structural change since 1970, the pace of
transformation varied among countries. The top five countries where the share of agriculture
in GDP declined most are (in descending order) Nepal, Indonesia, Tonga, Sri Lanka and the
Republic of Korea. Among the countries that experienced slow structural transformation (in
ascending order) are Papua New Guinea, Myanmar, the Democratic People’s Republic of
Korea, the Islamic Republic of Iran and Vanuatu.
Geometric growth rate using discrete compounding. See Explanatory notes and statistical methods
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