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The Economic Outlook for Southeast Asia, China and India is an annual publication on Asia’s regional economic growth, development and regional integration process. It focuses on the economic conditions of the Association of Southeast Asian Nations (ASEAN) member countries  – Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam –, and also addresses relevant economic issues in China and India to fully reflect economic developments in the region. The Outlook provides an annual update of regional economic trends and policy challenges, and a thematic focus which is specific to each volume. The 2015 edition of the Economic Outlook for Southeast Asia, China and India comprises two main parts, each highlighting a particular dimension of recent economic developments in the region. The first part presents the regional economic monitor, depicting the medium-term economic outlook and macroeconomic challenges in the region. The second part consists of three chapters on “institutional capacity”, which is the special thematic focus of this edition.

Medium-term development plans, which are used to co-ordinate government economic, social and environmental policies, can be used as benchmarks against which to measure performance and institutional capacities. This chapter includes country case studies on planning and plan implementation in the ASEAN-5 countries (Indonesia, Malaysia, Philippines, Thailand and Viet Nam), together with Myanmar, China and India. Although these countries have generally identified priority areas for growth well, they have uneven track records when it comes to meeting the targets they set. The recognition of areas of relative weakness should therefore be used to help identify targets that require rethinking or more effective implementation efforts. In general, greater attention could be paid to target setting and co-ordinating activities within government. Broad reforms to medium-term budgeting, supervision of line ministries and agencies, data collection, and staffing selection and incentivising can all help support effective implementation.

The growth prospects of Emerging Asia (Southeast Asia, China and India) look favourable overall in the medium term. Growth in the ASEAN-5 countries (Indonesia, Malaysia, the Philippines, Thailand and Viet Nam) remains robust and the CL M countries (Cambodia, Lao PDR and Myanmar) are emerging as an engine of regional growth, while there will be slowing in China. The region also remains exposed to several other external risks (including those stemming from the normalisation of US monetary policy, economic reform in Japan and euro area uncertainty) and internal risks (including political uncertainty and instability in a few countries). While most countries are well positioned to manage these risks, further efforts will be needed to improve the conditions for growth. Fiscal balances are, in general, not expected to change significantly but fiscal reforms still need to be strengthened further. Deeper regional integration in implementing the ASEAN Economic Community by 2015 is also critical for Southeast Asia.

Growth in Emerging Asia – Southeast Asia, China and India – is expected, in general, to remain strong over the medium term as these economies continue to shift from a reliance on exports to a broader base of new growth drivers. This rebalancing will boost consumption and investment and is helping the region to adjust to changing international conditions. While monetary policy normalisation in the United States has some worried, other risks persist. The prospect of continued slowing growth in China and the advanced economies, along with increased competition in export manufacturing among emerging economies, poses a serious threat to the export-led growth model. The implementation of “Abenomics” reforms will also be felt in the region’s economies with close trade and investment links to Japan.

While it is difficult to accurately define and measure informal output and employment, these appear to be quite high in several countries in the region. Tax and regulatory burdens, along with cyclical and structural economic factors and social norms, contribute to this situation. Fundamentally, these factors and the degree of informality over the long run depend on government capacities in developing market-building institutions to support formality and in enforcing tax and regulatory requirements on firms and workers. Informality appears to have been declining recently in many Emerging Asian economies and provides employment for marginalised workers. Nevertheless, it remains an important policy challenge to be addressed to support government capacity and economic strength and flexibility. Reforms to improve capacities generally and target informality and the areas of the economy where it is often found therefore need to be included in the development strategies of many countries.

While the growth prospects of the OECD countries continue to moderate, they look favourable overall in the 12 Emerging Asian economies (i.e. ASEAN-10, China and India) for 2015-19, averaging 6.5% per year, according to this Outlook’s Medium-term Projection Framework (MPF-2015). Although growth in Emerging Asia will moderate gradually due to the slowdown in China, for the ten ASEAN countries as a whole, growth momentum remains robust and broadly similar to the past ten years, averaging 5.6% in 2015-19. The year 2014 saw major transformations in the region’s political landscape, with economies being impacted differently. Indonesia’s presidential election brought Joko Widodo to power, while India’s general election ushered in Narendra Modi as the new Prime Minister. The electoral processes in both countries were widely regarded as successful, peaceful changes of government. However, territorial disputes over the sovereignty of the South China Sea affected tourism and exports in some countries, while political unrest in Thailand has had relatively strong economic impacts.

The Economic Outlook for Southeast Asia, China and India is an annual publication on Asia’s regional economic growth, development and regional integration processes. It focuses on the economic conditions of the Association of Southeast Asian Nations (ASEAN ) member countries (Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam) and two large economies in the region, China and India. This Outlook evolved from the Southeast Asian Economic Outlook.

Growth prospects look favourable overall in Emerging Asia (Southeast Asia, China and India) over the medium term. Gross domestic product (GDP) growth in the region is forecast to average 6.5% per year over 2015-19. Although growth in Emerging Asia will moderate gradually due to the slowdown in China, for the ten ASEAN countries as a whole, growth momentum remains robust and broadly similar to that of the past ten years, averaging 5.6% over 2015-19.

Recognising the importance of good institutions, recent decades have seen countries in Emerging Asia and around the world take an increased interest in public sector reform. Efforts to improve public financial management (through expenditure and tax administration reforms) and reform government administration (through anticorruption initiatives, civil service reforms, and restructuring and decentralisation) can help to make government more efficient in using scarce resources and more responsive in providing public goods and services. The results of these reforms have varied with circumstance and the ways in which they were implemented. Generally, it can be concluded that public sector reforms are gradual processes that cannot be isolated from broader developments in the public and private sectors. At the same time, good design alone is not usually a guarantee of success, as political economy factors, such as the interests of influential stakeholders, often have considerable influence on the outcomes of reforms.