The Recovery in Developing Asia: Prospects and ChallengesConference on the Post-Crisis Growth and Poverty Reduction in Developing Asia
Hanoi, Vietnam
Anoop Singh Director
Asia and Pacific Department
March 22, 2010
Outline
A Multi-speed Global Recovery Asian Low-Income Countries
(LICs):
Achievements and Challenges The Role of the IMF
2
3
A Multi-Speed Global Recovery
4
-10
-5
0
5
10
15
04 05 06 07 08 09
World
Emerging
Industrial
Real GDP Growth(Percent; quarter on quarter annualized)
Global growth has resumed, boosting exports...
Source: IMF, Global Data Source and staff calculations.
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Nov. 09
Emerging
Advanced
World
Merchandise Exports(Annualized percent change of 3mma over
previous 3mma)
…but the advanced economies’ recovery is sluggish.
2009 2010 2011
Prelim Proj. Proj.
World -0.6 3.9 4.3
Advanced Economies -3.1 2.1 2.4
United States -2.4 2.7 2.4
Euro Area -4.0 1.0 1.6
Japan -5.0 1.7 2.2
Emerging and Developing Economies 2.3 6.0 6.3
China 8.7 10.0 9.7
India 5.6 7.7 7.8
Brazil -0.4 4.7 3.7
Emerging Asia 5.6 8.1 8.0
ASEAN-4 0.9 4.6 5.2
5
Source: World Economic Outlook.
Emerging Asia is leading the global recovery.2
00
6Q
12
00
6Q
22
00
6Q
32
00
6Q
42
00
7Q
12
00
7Q
22
00
7Q
32
00
7Q
42
00
8Q
12
00
8Q
22
00
8Q
32
00
8Q
42
00
9Q
12
00
9Q
22
00
9Q
3
-15
-10
-5
0
5
10
15
Emerging Asia
G2
Other Emerging Economies
Industrial Asia
Real GDP Growth(Quarter-on-quarter, SAAR; in percent)
6
2006
M01
2006
M04
2006
M07
2006
M10
2007
M01
2007
M04
2007
M07
2007
M10
2008
M01
2008
M04
2008
M07
2008
M10
2009
M01
2009
M04
2009
M07
2009
M10
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
-0.599999999999999
-0.399999999999999
-0.199999999999999
5.55111512312578E-16
0.200000000000001
0.400000000000001
0.600000000000001
retail sales
cci (-5)
stock prices (-1) (RHS)
Selected Asia 1/: Stock prices , Consumer Con-fidence Index (CCI) and Retail sales (year-on-year percentage change)
1/ Includes Australia, Hong Kong, Indonesia, Korea, Thailand, and Taiwan.
The global outlook, however, is unusually uncertain.
+ A stronger-than-expected improvement in financial market sentiment
+ Stronger confidence effects boosting private demand
− Intensification of market concerns about fiscal sustainability in some industrial economies
− Diminished room for policy action in many advanced economies
7
Asian LICs: Achievements and Challenges
8
Impressive growth, and significant progress in reducing poverty.
9
Real GDP Growth(Average 2000–08, in percent)
Poverty Rate for Selected Asian LICs (In percent of population)
Source: World Economic Outlook.
10
Asian LICs weathered the global crisis well.
-7
-6
-5
-4
-3
-2
-1
0
LICs ASEAN-4 NIEs G-3
200820092010
1/ G-3 includes the US, European Union and Japan.
1/
Real GDP Growth in Comparison with Pre-crisis Average (2000–07) (percent)
Export Growth(3-month moving average, SAAR)
The near-term growth outlook is good.11
Asia: Real GDP(Year-on-year percent change)
Average of 2000–07 2008 2009 2010 2011
Asian LICs 6.3 6.1 4.7 5.6 6.2Bangladesh 5.8 6.0 5.4 5.4 5.9Cambodia 9.6 6.7 -2.7 4.3 6.8Lao P.D.R. 6.6 7.8 7.6 7.2 7.4Mongolia 6.6 8.9 -1.0 8.6 6.5Nepal 3.8 4.7 4.0 4.1 4.9Papua New Guinea 2.2 6.7 4.5 6.8 5.1Sri Lanka 5.1 6.0 3.5 5.5 6.5Vietnam 7.6 6.2 5.3 6.0 6.5
Emerging Asia 7.8 7.1 5.6 8.1 8.0 NIEs 5.0 1.7 -1.2 4.8 4.7 ASEAN-4 5.2 4.6 0.9 4.6 5.2 China 10.1 9.6 8.7 10.0 9.7
India 7.2 7.3 5.6 7.7 7.8
Source: World Economic Outlook.
However, there are near-term challenges— inflation is rising and some face external pressures.
-5
0
5
10
15
20
25
Jan-
07Ap
r-07
Jul-0
7O
ct-0
7Ja
n-08
Apr-
08Ju
l-08
Oct
-08
Jan-
09Ap
r-09
Jul-0
9O
ct-0
9
NIEsASEAN-4 (excl. Vietnam)
12
Emerging Asia: Consumer Prices(3-month percent change of 3-mma, SAAR)
Current Account Balance(In percent of GDP)
Source: World Economic Outlook.
— LICs
There are also vulnerabilities from fiscal deficits and relatively high public debt.
13
Fiscal Balance (2008–10)(PPP-GDP weighted average, in percent)
Public Debt (2008–10)(In percent of GDP)
Source: World Economic Outlook and IMF staff calculations.* Excludes Nepal.
How can Asian LICs become the next generation of emerging economies?
14
Nominal per Capita GDP(2008, in U.S. dollars)
Illustrative per Capita GDP Growth (in U.S. dollars)
15
Business Climate (Rank among 185 countries,
Rank #1 = best climate)
Evidence points to building stronger institutions, macro stability, financial development , and a business climate.
Source: World Bank, Doing Business Report
01234567
Institutions
Infrastructure
Macroeconomic stability
Health & primary
education
Higher education & training
Goods market efficiencyLabor market
efficiency
Financial market sophistication
Tech. readiness
Market size
Business sophistication
Innovation
Asian Low-income Countries (average) 2/Malaysia and Thailand (average)
Source: World Economic Forum, Global Competitiveness Report, 2009-2010Note: 1/ For selected Asian countries. Each factor is scored in the 1–7 scale with 1 being the poorest quality and 7 being the best. 2/ Including Bangladesh, Cambodia, Mongolia, Nepal, Sri Lanka, and Vietnam.
Global Competitiveness Index1
(Higher score = more competitive)
Strengthening public infrastructure and human capital will clearly also be of central importance.
16
Source: World Economic Forum.
Infrastructure Index(Higher score = better)
Source: UNDP.
Human Development Index(Combines education, health and income,
higher score = better)
0
1
2
3
4
5
6
7
Hong
Kong
, SAR
Singa
pore Jap
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and
China
Indon
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0.2
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Aust
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New
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Providing a more attractive environment for foreign direct investment will help develop export industries.
17
Exports to GDP(Average 2007–09, in percent)
* Excludes resource-based economies.
FDI plus Portfolio Investment to GDP (Average 2007–09, in percent)
18
The Role of the IMF
19
The IMF has responded on several fronts. Increasing global liquidity
IMF members’ central bank reserves were augmented with US$283 billion in new Special Drawing Rights (SDRs)
LICs received around US$ 18 billion
More resources for IMF lending IMF’s loanable resources were tripled to US$750
billion In 2009, US$3.8 billion in new concessional loans
were extended; a further US$8 billion will be made available in the next two years
Borrowing limits have been doubled for all countries
The cost of borrowing for LICs was reduced to zero percent through 2011 (¼ percent thereafter)
Lending facilities have been improved and made more flexible
20
The IMF has satisfied an unprecedented demand for assistance from a diverse range of member countries.
IMF Programs and Precautionary Credit Lines, 1997–2009
LVA
ARM
SRI
MNG
SYC
THAIDN
KOR
ARG
PHL
IDN
UKR
BRA MEX
RUS
COL
TUR
IDN
ARG
BRA
TUR
URY
BRA
COL
ARG ARG
TUR
IRQ
ISLROM
HUN MEX
POLCOL
UKR
BIHSER
PAK
BLR
GEO GTM
-30
-25
-20
-15
-10
-5
0
5
10
15
1997 1999 2001 2003 2005 2007 2009
Per
cen
t c
han
ge
in
re
al
GD
P 1
/
Size of bubble = access in percent of quota
1/ Maximum cumulutive decline in three years from program inception
100 percent of quota
21In Asia, programs with Mongolia and Sri Lanka have helped stabilize the economy and facilitate a return to growth.
Sri Lanka
Change in Reserves and Growth (2007–11)
Mongolia
Thank you
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