'Income inequality threatens Asia growth'

Developing Asia's rapid growth in recent years has given rise to a widening rich-poor divide that threatens to undermine the region's growth and stability, but governments can address the problem via shifts in spending priorities, the Asian Development Bank said.

The region must spend more on education and health, create quality jobs and invest in infrastructure to reduce imbalances between developed and lagging rural areas so as to prevent social problems that can lead to inefficient populist policies, the Manila-based ADB said on Wednesday.

In its Asian Development Outlook 2012 report, the bank said if inequality in the region had remained stable over the past two decades, growth over the years would have lifted 240 million people more out of poverty, the equivalent of 6.5 per cent of developing Asia's population in 2010.

But instead, inequality widened even as Asia's economic growth took off.

In the same report, the ADB said the region's emerging economies were set to cool this year before rebounding in 2013, fuelled by strong domestic demand, with risks coming from slackening trade flows owing to continued uncertainties in the euro zone.

Developing Asia is set to grow 6.9 per cent this year, slowing from 7.2 per cent in 2011.

This year's growth forecast for 45 economies in Central Asia, East Asia, South Asia, Southeast Asia and the Pacific was lower than the 7.5 per cent estimate in the ADB's September update of the 2011 Asian Development Outlook.

But growth should pick up speed to 7.3 per cent in 2013 as the region adjusts toward a more sustainable long-run growth path, the ADB said.

INCOME GAP

The share of income going to the richest households has increased in the past decade, with close to 20 per cent of total income cornered by the wealthiest 5 per cent in most countries in the region, the bank said.

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