Asian Development Outlook 2015 Update:

Enabling Women, Energizing Asia

Shang-Jin Wei

Chief Economist

Asian Development Bank

The views expressed in this document are those of the author and do not necessarily reflect the views and policies of the

Asian Development Bank or its Board of Governors or the governments they represent.2

EMBARGOED UNTIL 9:30 AM

Manila/Hong Kong, China/Singapore time

Tuesday, 22 September 2015

Key messages

• Developing Asia’s growth downgraded to 5.8% this year and 6.0% in 2016

– PRC and India projected to grow at 6.8% and 7.4%, respectively, lower than previous forecasts

– Moderating prospects for PRC and India and delayed recovery in industrial countries weigh on the outlook

• Inflation pressures further easing partly due to lower global commodity prices

• Risks have increased (e.g., capital flow reversal, currency depreciation), but still manageable

• Special report: Greater women’s participation in economic activities can boost income by up to 30%

3

Economic outlook:

Developing Asia facing headwinds…

4

f: forecast

…yet still contributing the most to global growth

5

⇒ Asia continues to account for about 60% of global

growth; still fastest-growing region

Percentage contributions to global GDP growth

Regional and global factors

weigh on growth

GDP growth (%)

2015 2016

ADO

2015Update

ADO

2015Update

Major industrial economies 2.2 ↓ 1.9 2.4 ↓ 2.3

United States 3.2 ↓ 2.6 3.0 ↓ 2.9

Euro area 1.1 ↑ 1.5 1.4 ↑ 1.6

Japan 1.1 ↓ 0.7 1.7 ↓ 1.4

6

• Moderating prospects in the PRC and India

• Delayed recovery in industrial countries

Large variations across subregions

7

f: forecast

PRC growth somewhat lower;

projected to average 6.8% in 2015

8

Growth in retail sales and industry value added

Fixed asset investment growth

Stock market (Shanghai Stock Exchange: A Share)

Export and import growth

India’s growth at 7.4% this year;

below earlier forecasts

9

• Slower than expected

implementation of key

structural reforms

• Weaker than projected growth

in advanced economies

• Flagging global trade

Fixed investment

Export growth Investment projects dropped

Indonesia’s growth downgraded to 4.9%

as investment and private spending slowed

Policy and inflation rates

Fixed investment and private consumption growth Support for stronger infrastructure

investment

• Faster capital budget

disbursement

• Capital injection in SOEs involved

in infrastructure

• Accelerating land acquisition

10

Credit growth

ASEAN growth flat at 4.4% in 2015;

pickup delayed to next year

11

f: forecast

ASEAN=Association of Southeast Asian Nations; BRU=Brunei Darussalam; CAM=Cambodia; INO=Indonesia; LAO=Lao

PDR; MAL=Malaysia; MYA=Myanmar; PHI=Philippines; SIN=Singapore; THA=Thailand; VIE=Viet Nam

Inflation further easing

12

f: forecast

Current account surplus maintained

13

f: forecast

Challenge 1:

Capital flow reversal

• Capital flows have been receding since Q2 2014

• Monetary policy dilemma between financial sector stabilization and demand stimulation

• Macroprudential policy provides scope for monetary policy independence

14

Capital flows to selected Asian economies

Note: Emerging Asia consists of the People's Republic of China; Hong Kong,

China; India; Indonesia; Republic of Korea; Malaysia; Philippines; Singapore;

Taipei,China; Thailand; and Viet Nam.

Challenge 2:

Currency depreciation

15

US dollar versus regional currencies

• Depreciation poses a threat to Asian firms with large,

short-term foreign debt but little foreign revenues

• Improving domestic financial systems can mitigate risks

Foreign currency liabilities

relative to foreign currency assets

16

BAN=Bangladesh; CAM=Cambodia; IND=India; INO=Indonesia; KAZ=Kazakhstan; KOR=Rep. of Korea; LAO=Lao PDR; MAL=Malaysia;

MYA=Myanmar; PAK=Pakistan; PHI=Philippines; PRC=People’s Rep. of China; SRI=Sri Lanka; TAP=Taipei,China; THA=Thailand; VIE=Viet Nam

Foreign liabilities / foreign assets refer to banking institutions, deposit money banks, and other depository corporations.

Special topic:

Enabling women, energizing Asia

• Notable progress in enabling women in education and health, but the task of closing gender gap remains unfinished

• Female labor force participation fell from 56% in 1990 to 49% in 2013; below men’s 80%

• Women earned 77% of average male earnings

• Enabling women can boost per capita income by up to 30% (though smaller effect on GDP)

17

Advancements in women’s education…

18

…and life expectancy

19

but significant gaps in women’s workforce participation

Gender gap in labor force participation rates, developing Asia

Female labor force participation rates

20

0

15

30

45

60

75

1990 1994 1998 2002 2006 2010

%

Middle East and North Africa

Advanced economies

Sub-Saharan Africa

Developing Asia

Latin America and the Caribbean

World

20

23

26

29

32

1990 1994 1998 2002 2006 2010

Percentage

points

Note: Gender gap is male minus female labor force

participation rates.

Source: ILO. International Labour Organization. Key Indicators of the Labour Market.

Factors inhibiting women’s workforce entry• Cultural and social norms

• Legal and institutional frameworks

• Access to economic opportunities

21Source: World Bank. Women, Business and the Law 2016

database, http://wbl.worldbank.org/data

Source: World Values Survey Association. World Values Survey Wave 6: 2010–

2014. www. worldvaluessurvey.org ; International Labour Organization. Key

Indicators of the Labour Market.

Rising income does not automatically lead

to narrower gender gap in labor force participation

22

PRC

India

Indonesia

Republic of Korea

Afghanistan

Bangladesh

Lao PDRNepal

Pakistan

Philippines

Singapore

Female to male labor force participation ratio

0

.3

.6

.9

1.2

6 8 10 12Log GDP per capita, PPP(current international $)

Gender gap in labor force participation and income, 2013

Sources: ADB estimates using data from the International Labour Organization. Key Indicators of the Labor Market online

database; CEIC Data Company; World Bank. World Development Indicators online database (all accessed 4 September 2015)

Women are underrepresented in governments

23

Source: Inter-Parliamentary Union. Women in Politics 2015.

Percentage of women in ministerial positions,

selected Asian economies, Jan 2015

0

5

10

15

20

25

30

PAK AZE PNG THA SIN MAL KOR BAN SRI VIE PRC KAZ FIJ PHI IND INO FSM

24Source: Inter-Parliamentary Union. Women in Politics 2015.

PAK=Pakistan, AZE=Azerbaijan, PNG=Papua New Guinea, T HA=Thailand, SIN=Singapore, MAL=Malaysia, KOR=Republic of Korea,

BAN=Bangladesh, SRI=Sri Lanka, VIE=Viet Nam, PRC=People’s Republic of China, KAZ=-Kazakhstan, FIJ=Fiji, PHI=Philippines, IND=India,

INO=Indonesia, FSM=Federated States of Micronesia

Female shares in boardrooms

25Sources: Bloomberg and annual reports of top 10 companies for each country.

Women earn less:

26

Percentage difference in male/female wages vs. GDP per worker

Sources: ADB estimates using data from the International Labour Organization. Key Indicators of the Labor

Market online database; CEIC Data Company; World Bank. World Development Indicators online database

(all accessed 4 September 2015)

-1

-.5

0

.5

8 9 10 11GDP per worker (in logarithm)

Factors responsible for earnings gap

• Occupational segregation by rule or by norm

• Less work experience because of breaks in

women’s employment due to childcare

• Differences in skill levels

• Gender biases

27

A simulation model of gender and income in Asia

28

Sources: Jinyoung Kim, Jong-Wha Lee, and Kwanho Shin, “A Model of Gender Inequality and Economic Growth”; Jinyoung Kim, Jong-

Wha Lee, and Kwanho Shin, “Gender Equality and Economic Growth in Korea”; background papers for the ADO 2015 Update theme

chapter.

Eliminating gender inequality can increase

per capita income by over 30%

• With a complete elimination of inequality:

– Female labor force participation increases from 54% to 67.5% (Korea study)

– Annual per capita growth rises from 3.6% to 4.1% (Korea study)

– Per capita income rises by 30% in a generation in a hypothetical gender-equality economy

– Effect on aggregate income is smaller because the interventions tend to reduce fertility rates

29

Sex ratio imbalances

can have economic consequences

• Men work harder, save more, and engage in more entrepreneurial activity

• Parents of sons tolerate unsafe workplace practices; employers respond by underinvesting in workplace safety, leading to higher work-related accidents and mortality

• Increase in prices of status goods such as housing

30

Source: Population Division, Department of Economic and Social Affairs,

United Nations Secretariat. World Population Prospects: The 2015 Revision.

http://esa.un.org/unpd/wpp/DVD

Sex ratios at birth in developing Asian economies

Policy options to enable women

• Provide better education and skills and vocational training to match labor market needs

• Remove legal impediments to gender equity, lift constraints on entrepreneurship, expand ICT access, ensure fair compensation

• Improve information on available employment resources and jobs and encourage parental leave, child care, and flexible work arrangement options

• Increase women’s mobility and security—which inhibit both higher education and training attainment and labor force participation—through family-friendly infrastructure

31

Competition can help reduce inequality

• Trade openness encourages firms to be more competitive, making discrimination costly

• Examples:

– Footwear industry in Cambodia and Viet Nam

– Readymade garment industry in Bangladesh

– Electronics assembly in the PRC; Taipei,China; and Thailand

– Business process outsourcing in India and the Philippines

32

Key messages

• Developing Asia’s growth downgraded to 5.8% this year and 6.0% in 2016

– PRC and India projected to grow at 6.8% and 7.4%, respectively, lower than previous forecasts

– Moderating prospects for PRC and India and delayed recovery in industrial countries weigh on the outlook

• Inflation pressures further easing partly due to lower global commodity prices

• Risks have increased (e.g., capital flow reversal, currency depreciation), but still manageable

• Special report: Greater women’s participation in economic activities can boost income by up to 30%

33