Asia’s economies can embrace services in order to boost growth and productivity, according to an update from the International Monetary Fund (IMF).
The latest report from the IMF noted that manufacturing has been the engine of growth in Asia, but a transition to “modern, tradable services” could be a new and potentially more viable source of “growth and productivity.”
The research report from the IMF also noted that the Asia-Pacific region prospered by becoming the source of “more than half of global factory output, but another transformation to higher-productivity services has the potential to further support growth.”
It’s also worth noting that a research study by PitchBook has recently revealed that the APAC region has many relatively strong fintech ecosystems, driven by various macro trends such as the fast-growing economies, rising middle classes, and fairly large “underbanked populations seeking access to financial services.”
According to the research study shared by the IMF, employment and production typically “move from agriculture to manufacturing to services, as part of natural progression that comes with rising income.”
At present, many Asian countries—including China, Indonesia, Korea, and Thailand—are “highly industrialized.”
The IMF report added that if history is a guide or any type of indicator, then the industry’s share of production will “shrink as more activity passes to services.”
Indeed, IMF research report pointed out that the growth of services has already drawn about “half of the region’s workers into that sector, up from just 22 percent in 1990, as hundreds of millions moved from farms and factories.”
As explained in the report from the IMF, this shift is likely to accelerate with further expansion of “international trade in modern services such as finance, information, and communication technology, as well as business outsourcing (for example, as done in India and the Philippines).”
By contrast, the IMF report mentioned that traditional services—for example, tourism or distribution services—have “lower productivity and contribute less to economic growth.”
The IMF update further explained that policymakers should “embrace this shift to modern services because they have higher productivity.”
The IMF report also stated that transitioning to a “more services-led economy comes with greater economic growth opportunities, provided the right policies are in place.”
As stated in the IMF research study, productivity is an “important variable when considering which sectors can best deliver growth in coming years. Manufacturing productivity in Asia is already close to the level of global leaders, so further improvement offers only limited scope to boost productivity and growth.”
By contrast, services in Asia don’t enjoy the same “efficiency advantage, so the region’s economies have more to gain by catching up with countries that have the most…
Read More: Asia’s Financial Services Focused Labor Productivity, Digital Technology
