A mother and daughter wading through the flood waters in Feni, Bangladesh in 2024. Catastrophic floods disrupted employment, trade and economy. Policymakers should stand ready to implement policies for speedy recovery. Credit: UNICEF/Sultan Mahmud Mukut

By Shuvojit Banerjee
BANGKOK, Thailand, Jul 25 2025 (IPS)

In the past year, Asia and the Pacific has faced intensifying climate pressures, from extreme heat in Bangladesh and India to devastating floods in northern Thailand and rising food insecurity across the Pacific.

But these are just the most visible signs. Beneath the surface, increasing temperatures, shifting rainfall and rising sea levels are quietly eroding fiscal space, distorting prices of goods and services, and weakening long-term economic resilience. Climate risks, both sudden and slow, are also reshaping the region’s macroeconomic landscape.

The latest ESCAP Economic and Social Survey of Asia and the Pacific explores how this evolving threat is affecting jobs, inflation, public finance and long-term economic resilience. To better understand countries’ readiness to confront these risks, ESCAP developed a new assessment framework that evaluates the intersection of climate exposure and macroeconomic coping capacity.

It focuses on two core dimensions: exposure, which is measured through potential output losses, agricultural risk, carbon intensity and climate-driven inflation; and macroeconomic coping capacity, which is captured through indicators of fiscal space, financial sector health, and institutional effectiveness.

When plotted on a two-axis matrix, countries fall into four quadrants depending on their exposure and macroeconomic coping ability. This matrix serves as a comparative tool to guide targeted policymaking.

Resilience is a balance: Exposure and coping must go hand in hand

Countries in the higher exposure-lower capacity quadrant face the most pressing risks. For example, Afghanistan, Cambodia and Nepal fall in this category due to both geographic and structural vulnerabilities, including recurrent climate events, limited fiscal buffers, and weaker institutional capacity.

The higher exposure-higher capacity quadrant includes countries such as Kazakhstan, Mongolia and Viet Nam. While each faces different forms of climate stress, they share stronger governance and macroeconomic fundamentals that support more effective responses.

Countries such as China, Malaysia and Thailand fall into the lower exposure-higher capacity quadrant. These economies benefit from current low climate exposure and resilient financial systems. Nevertheless, they need considerable investment in adaptation to prevent future vulnerability, especially given regional interdependence and evolving risks.

Finally, the lower exposure-lower capacity quadrant includes countries such as Lao PDR, Papua New Guinea, and Solomon Islands. These countries may face fewer direct climate threats today but remain vulnerable to disruption due to weak institutional and fiscal capacity. Even moderate shocks can have severe macroeconomic consequences.

Taken together, the quadrant framework underscores the need for differentiated policy approaches. For example, countries with high exposure and low capacity should focus on boosting fiscal space, strengthening financial sector resilience including through climate-aligned regulation and risk tools, and enhancing economic institutional capacity.

In contrast, countries with low exposure and strong capacity are well-placed to invest in adaptation innovation and support other regional peers.

Climate stress is a core economic risk

Climate change is already disrupting employment, trade, investment and public finance across the region. It is no longer an external shock but a defining macroeconomic challenge.

Governments must respond with sustained, systemic reform. Macroeconomic planning across Asia and the Pacific must place resilience at its core – not only to manage immediate shocks but to navigate a slower-moving, climate-shaped economic future.

Shuvojit Banerjee is Economic Affairs Officer, ESCAP

IPS UN Bureau

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Credit:ESCAP

By Shuvojit Banerjee and Poh Lynn Ng
BANGKOK, Aug 22 2019 (IPS)

Asia and the Pacific is lauded globally for its rapid economic growth over recent decades and has lifted 1.1 billion people out of extreme poverty since 1990. Nevertheless, the region continues to have the largest number of poor people in the world.

Why is Asia and the Pacific’s economic progress not translating into faster poverty reduction?

The UN’s recently released World Economic Situation and Prospects mid-2019 Report finds that the overall economic growth outlook for the Asia-Pacific region remains strong compared to other developing regions. Nevertheless, the report downgraded the growth projections for 2019 across most developed and developing regions, while warning of significant downside risks to the regional outlook.

The new round of tariff hikes and retaliations could exacerbate the continuing weaknesses in trade volumes and disrupt regional production networks. Meanwhile, elevated household and corporate debt in parts of East Asia are posing risks to financial stability.

Most worryingly, the region remains far from achieving a decent life for all its people. High economic growth has not translated into sufficient reduction in poverty in many countries, and the rising risks to growth over the coming years will only exacerbate the challenge.

The region has an estimated 400 million people living in extreme poverty below the threshold of $1.90 a day. At the higher international poverty line of $3.20 a day, the number of poor rises to 1.2 billion, accounting for more than a quarter of the region’s total population.

Beyond monetary measures, indicators of multidimensional aspects of poverty paint an even bleaker picture. In many parts of the region, most notably in South and South-West Asia, a large share of the population still lacks access to basic infrastructure and services.

As poor households are constrained in their ability to receive nutrition, schooling and healthcare for their children, this is greatly dampening progress on human capital development and productivity growth, both of which are critical imperatives for sustainable development.

Credit: United Nations

Managing rapid urbanisation is also necessary to tackle the challenge of growing urban poverty in many Asia-Pacific economies. More than half of the region’s population now live in urban areas – and this share is expected to rise to two-thirds by 2050.

Keeping in view the ambitions of the 2030 Agenda for Sustainable Development, how do we leave no one behind in the Asia-Pacific region?

ESCAP’s recently published Asia and the Pacific SDG Progress Report 2019 stressed that economic growth alone is not sufficient for poverty reduction. What matters is the types of investment by governments.

Countries that have driven poverty reduction trends have focused their investments on people, importantly through the provision of health, education and social protection. Good examples in the region include Timor-Leste, Mongolia, Viet Nam, Papua New Guinea and Bhutan.

How much would all these investments cost? ESCAP’s most recent Economic and Social Survey of Asia and the Pacific provides comprehensive estimates of investments required to achieve the SDGs in the region.

The report focused on two aspects of investments in people: providing basic human rights (no poverty and zero hunger – SDGs 1 and 2) and building human capabilities (health and education for all – SDGs 3 and 4).

To eliminate poverty, policy interventions include cash transfers based on national poverty lines and establishing a social protection floor. Interventions for hunger include nutrition-specific investments and rural investments.

To build human capacities, the estimates include the cost of providing health infrastructure and the cost of universal pre-primary to upper-secondary schooling.

The report finds that the total spending required to achieve these goals is well within reach for many governments. Specifically, the cost of eliminating poverty and hunger and achieving health and education for all amounts to $669 billion per year on average, or less than 2 per cent of average GDP of developing countries in the region between 2016-2030.

For countries that are unable to meet the costs on their own, particularly the least developed countries (LDCs) where the estimated costs reach 12 per cent of GDP, assistance from the international community will be crucial.

What are some of the key policy imperatives? First, the social protection floor should account for the largest share of required investments, as it has an enormous impact through protecting all age groups from poverty.

Second, countries with the highest success rates of reducing poverty through social protection have designed and implemented universal programmes instead of poverty-targeting ones. These countries include Georgia, Kyrgyzstan, Mongolia, Nepal and Uzbekistan.

Finally, managing the cross-cutting challenges related to urban poverty will require improved urban planning and better policy coordination between national and local authorities. Two cities exhibiting such approaches, with policy support from ESCAP, are Da Nang in Viet Nam and Naga in the Philippines.

As governments in the region strive towards eliminating poverty by 2030, people-centered investments will be the key towards improving the livelihoods of the marginalised and disadvantaged segments of society.

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