Asian Development Outlook 2009 Rebalancing Asia’s Growth Donghyun Park Senior Economist Economics...
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Transcript of Asian Development Outlook 2009 Rebalancing Asia’s Growth Donghyun Park Senior Economist Economics...
Asian Development Outlook Asian Development Outlook 20092009
Rebalancing Asia’s GrowthRebalancing Asia’s Growth
Donghyun ParkSenior Economist
Economics and Research DepartmentAsian Development Bank
31 March 2009
OutlineOutline
1. Economic prospects– Global recession– Impact on Asia– Regional outlook (2009 and 2010)
2. Rebalancing Asia’s growth
Key messagesKey messages
• Growth to decelerate further in 2009• Inflationary pressures continue to
ease • Downside risks high from global
economic uncertainty• Governments adopt policy measures
to counter crisis effects• Rebalancing needed to support long-
term growth and welfare
Developing Asia’s growth Developing Asia’s growth down this yeardown this year
7.9 8.18.9
9.5
6.3
3.4
6.0
0
2
4
6
8
10
2004 2005 2006 2007 2008 2009 2010
%
GDP Growth 5-year moving average
Inflationary pressures easeInflationary pressures ease
4.03.4 3.3
4.4
6.9
2.4 2.4
0
2
4
6
8
2004 2005 2006 2007 2008 2009 2010
%
Inflation 5-year moving average
Regional outlookRegional outlook
GDP growth
0 5 10
CentralAsia
East Asia
South Asia
SoutheastAsia
The Pacific
DevelopingAsia
%
2008 2009 2010
Inflation
0 10 20
CentralAsia
East Asia
South Asia
SoutheastAsia
The Pacific
DevelopingAsia
%
2008 2009 2010
Global recession this yearGlobal recession this year
2007 Actual
2008 Actual
2009 Projectio
n
2010 Projectio
n
GDP growth (%)
Industrial countries
2.3 0.7 -2.6 1.1
United States 2.0 1.1 -2.4 1.6
Eurozone 2.6 0.8 -2.6 0.5
Japan 2.4 -0.6 -3.5 1.1
Inflation (G3 average)
2.2 3.2 -0.3 1.2
World trade volume (% change)
7.5 6.2 -3.5 1.9
US output dropped US output dropped as domestic demand wanedas domestic demand waned
Contributions to GDP growth, United States
-9-6-3036
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3 Q4
ppts
Personal consumption Government consumptionGross fixed capital formation Change in inventoriesNet exports GDP growth
Japan’s output clipped Japan’s output clipped as exports plummetas exports plummet
Contributions to GDP growth, Japan
-15-10-505
10
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3 Q4
ppts
Private consumption Government consumptionGross capital formation Net exportsResidual GDP growth
Eurozone output declinedEurozone output declinedas exports and consumption fellas exports and consumption fell
Contributions to GDP growth, Eurozone
-9-6-3036
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3 Q4
ppts
Private consumption Government consumptionGross capital formation Net exportsStatistical discrepancy GDP growth
Risks to the global outlookRisks to the global outlook
• Ineffective financial crisis resolution
• Insufficient fiscal stimulus• Emerging protectionism• Volatile commodity prices• Deflationary threat• Socio-political instability
Asia’s subprime losses limitedAsia’s subprime losses limited
US Japan Asia
Subprime losses($ billion)
157.7 8.7 19.5
% of bank assets
10.03 1.52 1.95
% of bank capital
1.02 0.08 0.09
Notes: Asia includes Japan.Data as of May 2008.
Asia’s banking sectors solid …Asia’s banking sectors solid …
Nonperforming loans
0 10 20 30 40 50
China, People's Rep. ofHong Kong, China
IndiaIndonesia
Korea, Rep. ofMalaysia
PhilippinesSingapore
Thailand
% of bank loans
1999 Latest
… … but there are concernsbut there are concerns
Equity prices
50
100
150
200
Jan-06 Jan-07 Jan-08 Jan-09
1Jan06=100
US Dow Jones Developing Asia
JPMorgan EMBI stripped spreads
0
500
1000
1500
2000
2500
Jan-06 Jan-07 Jan-08 Jan-09
basis points
Indonesia PakistanPhilippines Viet Nam
Exports down … Exports down … (y-o-y, 3-month moving average)(y-o-y, 3-month moving average)
East Asia
-40
-30
-20
-10
0
10
20
30
40
Jan-07
May Sep Jan-08
May Sep Jan-09
%
China, People's Rep. ofHong Kong, ChinaKorea, Rep. ofTaipei,China
South and Southeast Asia
-40
-20
0
20
40
60
Jan-07
May Sep Jan-08
May Sep Jan-09
%
India IndonesiaMalaysia PhilippinesSingapore Thailand
… … but imports more sobut imports more so(y-o-y, 3-month moving (y-o-y, 3-month moving
average)average)East Asia
-50
-25
0
25
50
Jan-07
May Sep Jan-08
May Sep Jan-09
%
China, People's Rep. ofHong Kong, ChinaKorea, Rep. ofTaipei,China
South and Southeast Asia
-40
-20
0
20
40
60
80
Jan-07
May Sep Jan-08
May Sep Jan-09
%
India IndonesiaMalaysia PhilippinesSingapore Thailand
Unemployment on the riseUnemployment on the rise
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Jan-07
Jul Jan-08
Jul Jan-09
%
Hong Kong, ChinaKoreaTaipei,China
0
2
4
6
8
10
Q12007
Q3 Q12008
Q3
%
Malaysia PhilippinesSri Lanka Thailand
Retail sales slowingRetail sales slowing(y-o-y)(y-o-y)
East Asia
-15
-10
-5
0
5
10
15
20
25
Q1 2007 Q3 Q1 2008 Q3 Q1 2009
%
China, People's Rep. ofHong Kong, ChinaKorea, Rep. ofTaipei,China
Southeast Asia
-20
-10
0
10
20
30
40
Q12007
Q3 Q12008
Q3 Q12009
%
Malaysia SingaporeThailand Viet Nam
Regional growth to decelerateRegional growth to decelerate
0
2
4
6
8
CentralAsia
East Asia South Asia SoutheastAsia
The Pacific DevelopingAsia
%
2008 2009 2010
Inflation easesInflation eases
0
3
6
9
12
15
18
CentralAsia
East Asia South Asia SoutheastAsia
The Pacific DevelopingAsia
%
2008 2009 2010
Current account to remain in Current account to remain in surplussurplus
-15
-10
-5
0
5
10
15
CentralAsia
East Asia South Asia SoutheastAsia
The Pacific DevelopingAsia
% of GDP
2008 2009 2010
Policy responses Policy responses
• Cut policy rates and reserve requirements
• Increase foreign exchange swaps• Hike deposit guarantees• Cut taxes• Target cash transfers• Hike infrastructure spending• Frontload disbursements
Policy rates cutPolicy rates cut
-800 -600 -400 -200 0 200 400
Viet NamIndia
Korea, Rep. ofHong Kong, China
Taipei,ChinaThailand
China, People's Rep. ofIndonesiaMalaysia
PhilippinesKazakhstan
SingaporeSri LankaPakistan
basis points
Fiscal stimulus packages Fiscal stimulus packages announcedannounced
Economy Size of package
% of GDP
China, People’s Rep. of
CNY4 trillion 13.3
Hong Kong, China HK$24.1 billion
1.4
India Rs800 billion 1.7
Indonesia Rp73.3 trillion
1.5
Korea, Rep. of W33 trillion 3.2
Malaysia RM67 billion 9.0
Philippines P330 billion 4.4
Singapore S$20.5 billion 8.0
Taipei,China NT$605 billion
4.8
Thailand B117 billion 1.3
East Asia’s domestic demand East Asia’s domestic demand unable to counter export unable to counter export
slowdownslowdownGDP Growth
-6
-3
0
3
6
9
12
EastAsia
PRC HKG KOR TAP
%
2008 2009 2010
Inflation
0
2
4
6
8
EastAsia
PRC HKG KOR TAP
%
2008 2009 2010PRC=China, People’s Republic ofHKG=Hong Kong, China
KOR=Korea, Republic ofTAP=Taipei,China
South Asia less affected by South Asia less affected by global recessionglobal recession
GDP Growth
0
3
6
9
SouthAsia
IND PAK BAN SRI
%
2008 2009 2010
Inflation
0
5
10
15
20
25
SouthAsia
IND PAK BAN SRI
%
2008 2009 2010IND=IndiaPAK=Pakistan
BAN=BangladeshSRI=Sri Lanka
Southeast Asia Southeast Asia near stagnationnear stagnation
GDP Growth
-6
-3
0
3
6
9
SEA INO MAL PHI SIN THA VIE
%
2008 2009 2010
Inflation
0
5
10
15
20
25
SEA INO MAL PHI SIN THA VIE
%
2008 2009 2010SEA=Southeast AsiaINO=Indonesia
SIN=SingaporeTHA=Thailand
MAL=MalaysiaPHI=Philippines
VIE=Viet Nam
Central Asia’s growth Central Asia’s growth to slow furtherto slow further
GDP Growth
0
3
6
9
12
CentralAsia
AZE GEO KAZ UZB
%
2008 2009 2010
Inflation
0
5
10
15
20
25
CentralAsia
AZE GEO KAZ UZB
%
2008 2009 2010AZE=AzerbaijanGEO=Georgia
KAZ=KazakhstanUZB=Uzbekistan
Expansion in the Pacific to Expansion in the Pacific to abateabate
GDP Growth
-3
0
3
6
9
12
Pacific PNG FIJ TIM SAM
%
2008 2009 2010
Inflation
0
5
10
15
Pacific PNG FIJ TIM SAM
%
2008 2009 2010PNG=Papua New GuineaFIJ=Fiji Islands
TIM=Timor-Leste, Dem. Rep. ofSAM=Samoa
Rebalancing Asia’s growthRebalancing Asia’s growth
• Asia’s sharp slowdown underlines risk of excessive reliance on external demand
• Region’s current account surplus an integral part of global imbalances
• Need to rebalance growth toward domestic demand
• Mix of policies required to shore up domestic and regional demand
Global imbalances remain largeGlobal imbalances remain large
-2
-1
0
1
2
3
1990 1994 1998 2002 2006 2010
% of world GDP
United States JapanChina, People's Rep. of RussiaMiddle East Rest of developing AsiaOther industrial countries Rest of world
Policy options to rebalance Policy options to rebalance growthgrowth
• Use fiscal and other policies to strengthen domestic consumption
• Enhance investment climate• Promote small- and medium-sized
enterprises and service industries• Adopt financial development and
exchange rate policies to promote better supply-demand balance
Policy options to rebalance Policy options to rebalance growthgrowth
• Strengthen regional cooperation• Encourage international dialogue to
resolve global imbalances
Asia’s rebalancing will contribute to orderly unwinding of global imbalances
Developing Asia should rebalance for its own growth and welfare
Thank youThank you
Contact:Asian Development Bank
6 ADB Avenue, Mandaluyong City1550 Metro Manila, Philippines
www.adb.org
Key messagesKey messages
• Growth to decelerate further in 2009• Inflationary pressures continue to
ease • Downside risks high from global
economic uncertainty• Governments adopt policy measures
to counter crisis effects• Rebalancing needed to support long-
term growth and welfare