contribution from capital accumulation. Although TFP growth remained subdued overall, it inched up in 2011-21 in the Philippines from its post-Asian financial crisis lows. In Mongolia, domestic policy setbacks and commodity price volatility weighed on total factor productivity growth and capital accumulation.

In the five decades to around 2010, economic growth in EAP was supported by a rapidly growing working-age population (IMF 2017a; World Bank 2015). Many economies in the region reaped a “demographic dividend” as the number of workers grew faster than the number of dependents. In the region as a whole, demographic trends have since become less favorable and are expected to deteriorate further over the next decade. The deceleration in working-age population growth has been especially stark in China and Thailand, due to population aging (Bloom, Canning, and Fink 2011). Several economies in the region, however, are still enjoying a demographic dividend (Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Papua New Guinea, and the Philippines).

Several factors besides demographic developments have affected labor force growth in EAP. Labor force participation rates (and productivity) have been boosted by an increase in secondary school completion rates of 10 percentage points between 2000-10 and 201121, a rise in the tertiary enrollment rate of 14 percentage points, and improvements in health reflected in an extension of life expectancy by two years. China and Malaysia have made particularly large strides in improving life expectancy and education over the past two decades. Although female labor force participation rates increased in some countries between 2000-10 and 2011-21, they remain relatively low in several of the largest economies in the region (Indonesia, Malaysia).

Capital accumulation slowed in most EAP economies in the second half of 2011-21 owing to several factors. In some ASEAN economies, such as Indonesia and the Philippines, supportive monetary policy spurred investment in the first decade after the global financial crisis, but its influence subsequently waned. In Malaysia, capital accumulation increased in the aftermath of the Asian financial crisis but later moderated, reflecting the worsening of terms of trade and heightened policy uncertainty. Despite the slowdown, the contribution of capital accumulation to potential growth in EAP remained larger than in other EMDE regions, reflecting high domestic savings rates and generally sustained FDI inflows.

The region attracted half of global FDI during 2011-21, with FDI representing over 5 percent of GDP in one-third of EAP economies and playing an important role in the transfer of new technologies, the development of human capital, integration into global markets, enterprise restructuring, and improved competitiveness (Moura and Forte 2010; World Bank 2017b). The region’s relatively rapid capital accumulation helped finance infrastructure upgrades. In the Philippines, for instance, improved macroeconomic policy management and the government’s public-private partnership initiative have boosted infrastructure investment.

In most EAP countries, potential TFP growth slowed or remained relatively weak in 201121. The slowing has been attributed to both temporary and more persistent factors (Asian Productivity Organization 2016; World Bank 2018a). Temporary factors include