Thu. Jun 20th, 2019

Reform and Other Secrets to Reaching Your Full (Economic) Potential

You’re not living up to your potential.

It’s a phrase that generations of high-school students rolled their eyes at as their parents, relatives and guidance counselors prattled on. But it also applies to economies.

From a peak of 8.4% in 2007, the potential growth of Asia’s 22 largest developing economies has slipped nearly 2 percentage points, the Asian Development Bank estimated in a report released Wednesday.

Potential growth is a fancy way the dismal science has of tracking whether an economy is hitting on all cylinders, namely what it could do if it enjoyed full employment, stable inflation and otherwise operated at productive capacity. Racing above an economy’s potential tends to stoke inflation. Dragging along behind it spurs unemployment.

Not surprisingly, the Asian region is seeing more finger wagging from pundits and other self-appointed guidance counselors as it’s slipped further behind its potential growth rate since the global financial crisis. Sure, the whole world has, but that’s another story.

The picture isn’t monochrome, however. While 14 of those 22 economies have seen their potential growth decline — including South Korea’s 2.1 percentage point slide and China’s 1.1 percentage point drop — Indonesia, Pakistan, Uzbekistan and the Philippines all improved. Go to the head of the class.

Read the complete story here

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