Low Soo Peng Economics in Theories
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Click icon to add pictureWashington State Export Destinations 2011 Value (Millions) % Share
Top 25 Markets and % Share of State Total $56,669 87.5
1 China 11,233 17.3
2 Canada 8,547 13.2
3 Japan 6,468 10.0
4 Korea, South 3,261 5.0
5 United Arab Emirates 2,753 4.3
6 Hong Kong 2,079 3.2
7 United Kingdom 2,017 3.1
8 Turkey 1,760 2.7
9 Australia 1,718 2.7
10 Taiwan 1,715 2.6
11 Indonesia 1,587 2.5
Asian Markets as Share of Washington State Exports = 46 % Worth over $26 billion in 2011
16. Singapore, 1.5% 19. Malaysia, 1.3% 22. Philippines, 1.2% 24. India, 1% Source: US Census Bureau
CHINA – 2012 IN REVIEW
Leadership Transition Slowing economic growth Local government debt situation Falling real estate prices Debt problems, slower growth,
weak export demand Increased outbound investment Continued friction in the South
China Sea
CHINA – 2012 ECONOMIC GROWTH
NEW POLITBURO STANDING COMMITTEE
President Xi Jinping Premier Li Keqiang
Zhang Dejiang Yu Zhengsheng Liu Yunshang Wang Qishan Zhang Gaoli
CHINA – 2013 OUTLOOK
Economic growth stable
Exports remain depressed
Real estate prices declining
Debt problems slow growth
Continued emphasis on innovation
Increased outbound investment
Continued friction in the South China Sea
OVERALL SLOWING ECONOMIC GROWTH
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Optimistic Base Pessimistic Optimistic Base Pessimistic
Total Factor Productivity
Capital Contribution
Labor Composition
Labor Quantity
Percent growth, y-o-y
Sources: The Conference Board Global Economic Outlook 2013, https://www.conference-board.org/data/globaloutlook.cfm?
2013-2018 2019-2025
CHINA – GROWTH AREAS IN 2013
Planning for Demographic changes Renewable energy Online retailing Infrastructure Construction / real estate Pollution mitigation and control Clean and green food products +
investment in overseas agriculture Expanded acquisition of overseas
resources
CHINA – 2013 RISK FACTORS Diaoyutai / Senkaku Conflict
Pollution
Corruption & Anti-corruption efforts
Rising costs
Economic inequality
Bankruptcy of some smaller cities
Growth of unregulated lending sector
INDONESIA’S PERFORMANCE: 2012 IN REVIEW
Source: Bank of Indonesia
2012 HIGHLIGHTS
Indonesia Financial Services Authority
(OJK) formed
Moody’s upgrades sovereign
credit rating to investment
grade: Baa3 from Ba1 (Outlook: Stable)
Central Bank
lowers BI rate to 5.75%
(from 6%)
Largest contract in
commercial & Boeing history: Lion Air order of 230 Boeing 737 airplanes worth $22.4
billion
Garuda named “Best International
Airline”
Foreign exchange
reserves hits highest level
(2012) of $114.93 billion
S&P affirms sovereign
credit rating at BB+
(Outlook: Positive)
Jakarta elects new Governor Joko (Jokowi) Widodo (snubs
political establishment)
McKinsey releases
“Unleashing Indonesia’s
Potential Report”: Now 16th. 2030,
could be world’s 7th
largest economy,
surpassing Germany &
UK)
Indonesia tops Nielson
Global Consumer Confidence Survey (Q3 2012) with
score of 119, (alongside
India).
Fitch affirmed
sovereign credit
rating at BBB-
(Outlook: Stable)
Indonesia, as next APEC
Chair, announces 2013 logo &
theme: Resilient Asia-Pacific –
Engine of Global Growth
January
January 18
January
February
February
April
April 23
September
September
November
November 21
December
GOOD BUT LOWER PERFORMANCE: WHY?
•Crisis in Europe & recession in US
•Instability in Middle East & Africa
•Slower economic growth in emerging countries esp. China & India
•Trade imbalance with declining exports (& burgeoning imports)
Global economic uncertainty
•Overburdened airports: Jakarta’s CGK at beyond capacity past 6 years
•Poor condition of ports: Unable to keep up with economic growth
•Bad roadways, bad traffic; floods
•Poor connectivity between towns/cities/regions
•Policies & regulations deemed as hindrance to businesses
Weak infrastructure &
high logistics costs
Government initiatives
Strong domestic consumption driven by emerging middle
class
Influx of investments
• Master Plan MP3EI (2011- 2025): Economic development• Master Plan MP3KI (2011- 2025): Poverty reduction• Tax incentives
• Highest contributor to economy: ≅ 2/3 of GDP • 240 million (World’s 4th most populous nation)• 45 million consuming class (to to 135 million in 2030)• Robust consumer confidence with surge in government & private sector
projects
• Second biggest contributor: ≅ 30% of GDP• Regaining of investment grade: Fitch in Dec. 2011 & Moody’s in Jan. 2012 • AT Kearney FDICI: Ranked #9 in the world (from 19 in 2010) • 2012 realization may top $31 billion (Rp. 300 trillion), a record
OUTLOOK FOR 2013 POSITIVE
Annual GDP growth target set at 6.8 % (BI forecast: 6.3% - 6.8%)
Domestic consumer demand 65% of GDP = less vulnerable to Europe & US drag
Fitch: Affirmed RI’s investment grade at BBB- (stable outlook); boost joining BRICS
Investment realization targeted to increase to Rp. 390.3 trillion (FDI $29 billion)
Household consumption (to 5.8 – 6.3%) & investment (to 10%) will continue to drive growth
Govt set inflation rate assumption at 3.5% - 5.5%
Government to hold BI rate steady at 5.75% (since March 2012)
Per capita income rising & middle class growing (to expand to > ½ total population)
Oil & gas investment to increase: $26.2 billion: 274 work plans & budgets approved
Exploding gas demand = efforts to reduce exports + expand downstream capacity
Sales of capital goods, including machine tools, will rise 8% to $27 billion
RISKS & CONCERNS
Endemic corruption/Judiciary a
problem: 118 in list of 176 countries (Transparency International)
Rising inflation from domestic fuel subsidies &
power tariff hike
Weak institutions & bureaucratic
inefficiencies: 128 out of 185 globally
(World Bank’s Doing Business)
Political uncertainty: 2014 elections
Infrastructure congested & inadequate to support
growth; respond to natural disasters
Lack of institutions with strong capital structure to finance planned projects
Crisis in developed world: Threaten exports,
foreign liquidity, investment growth
Emerging trend of trade deficits fueling current
account deficits & hurting the Rupiah
Under-developed HR: Low-skilled workforce + Minimum pay increase
not matched with increase in productivity
REASONS TO BE OPTIMISTIC + OPPORTUNITIES
Master plans to guide development & growth:
Impetus for change
Relative political & economic stability:
Conducive to business
Strong & growing domestic demand: Fuel growth, limit exposure
to external shocks
Poverty reduction means growing middle
class
Growing middle class means better qualified
workforce & bigger market
Positive investment outlook thanks to strong economic fundamentals
Abundance of fertile land & natural
resources
Financial markets poised for volatility:
Stock market to maintain good performance
Financial stability: Investor confidence evident in influx of capital investment
PUBLIC DEBT BURDENS (% OF GDP)
AT KEARNEY 2012 FDICI