Transcript Title

Asian Development Outlook 2009
Rebalancing Asia’s Growth
Donghyun Park
Senior Economist
Economics and Research Department
Asian Development Bank
31 March 2009
Outline
1. Economic prospects
– Global recession
– Impact on Asia
– Regional outlook (2009 and 2010)
2. Rebalancing Asia’s growth
Key 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 longterm growth and welfare
Developing Asia’s growth
down this year
%
10
8
7.9
8.9
8.1
9.5
6.3
6.0
6
3.4
4
2
0
2004
2005
2006
GDP Growth
2007
2008
2009
5-year moving average
2010
Inflationary pressures ease
%
8
6.9
6
4
4.0
4.4
3.4
3.3
2.4
2.4
2009
2010
2
0
2004
2005
2006
Inflation
2007
2008
5-year moving average
Regional outlook
GDP growth
Inflation
Central
Asia
Central
Asia
East Asia
East Asia
South Asia
South Asia
Southeast
Asia
Southeast
Asia
The Pacific
The Pacific
Developing
Asia
Developing
Asia
0
5
10
0
%
2008
2009
10
20
%
2010
2008
2009
2010
Global recession this year
2007
Actual
2008
Actual
2009
Projection
2010
Projection
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
2.2
3.2
-0.3
1.2
7.5
6.2
-3.5
1.9
GDP growth (%)
Industrial countries
(G3 average)
World trade volume
(% change)
US output dropped
as domestic demand waned
Contributions to GDP growth, United States
ppts
6
3
0
-3
-6
-9
Q1
2007
Q2
Q3
Q4
Personal consumption
Gross fixed capital formation
Net exports
Q1
2008
Q2
Q3
Q4
Government consumption
Change in inventories
GDP growth
Japan’s output clipped
as exports plummet
Contributions to GDP growth, Japan
ppts
10
5
0
-5
-10
-15
Q1
2007
Q2
Q3
Q4
Private consumption
Gross capital formation
Residual
Q1
2008
Q2
Q3
Q4
Government consumption
Net exports
GDP growth
Eurozone output declined
as exports and consumption fell
Contributions to GDP growth, Eurozone
ppts
6
3
0
-3
-6
-9
Q1
2007
Q2
Q3
Q4
Private consumption
Gross capital formation
Statistical discrepancy
Q1
2008
Q2
Q3
Q4
Government consumption
Net exports
GDP growth
Risks 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 limited
US
Japan
Asia
157.7
8.7
19.5
% of bank assets
10.03
1.52
1.95
% of bank capital
1.02
0.08
0.09
Subprime losses
($ billion)
Notes: Asia includes Japan.
Data as of May 2008.
Asia’s banking sectors solid …
Nonperforming loans
China, People's Rep. of
Hong Kong, China
India
Indonesia
Korea, Rep. of
Malaysia
Philippines
Singapore
Thailand
0
10
20
30
% of bank loans
1999
Latest
40
50
… but there are concerns
Equity prices
1Jan06=100
JPMorgan EMBI stripped
basis points
spreads
200
2500
2000
150
1500
1000
100
500
50
Jan-06
Jan-07
US Dow Jones
Jan-08
Jan-09
Developing Asia
0
Jan-06 Jan-07
Indonesia
Philippines
Jan-08 Jan-09
Pakistan
Viet Nam
Exports down …
(y-o-y, 3-month moving average)
East Asia
South and Southeast Asia
%
60
%
40
30
40
20
10
20
0
0
-10
-20
-20
-30
-40
Jan- May
07
Sep
Jan- May
08
Sep
China, People's Rep. of
Hong Kong, China
Korea, Rep. of
Taipei,China
Jan09
-40
Jan- May
07
Sep
India
Malaysia
Singapore
Jan- May
08
Sep
Indonesia
Philippines
Thailand
Jan09
… but imports more so
(y-o-y, 3-month moving average)
East Asia
South and Southeast Asia
%
50
%
80
60
25
40
0
20
0
-25
-20
-50
Jan- May
07
Sep
Jan- May
08
Sep
China, People's Rep. of
Hong Kong, China
Korea, Rep. of
Taipei,China
Jan09
-40
Jan- May
07
Sep
India
Malaysia
Singapore
Jan- May
08
Sep
Indonesia
Philippines
Thailand
Jan09
Unemployment on the rise
%
5.5
%
10
5.0
8
4.5
6
4.0
3.5
4
3.0
2
2.5
Jan07
Jul
Jan08
Jul
Hong Kong, China
Korea
Taipei,China
Jan09
0
Q1
2007
Q3
Malaysia
Sri Lanka
Q1
2008
Q3
Philippines
Thailand
Retail sales slowing
(y-o-y)
East Asia
Southeast Asia
%
%
40
25
20
30
15
10
20
5
10
0
0
-5
-10
-10
-15
Q1 2007
Q3
Q1 2008
Q3
China, People's Rep. of
Hong Kong, China
Korea, Rep. of
Taipei,China
Q1 2009
-20
Q1
Q3
Q1
Q3
Q1
2007
2008
2009
Malaysia
Singapore
Thailand
Viet Nam
Regional growth to decelerate
%
8
6
4
2
0
Central
Asia
East Asia
South Asia
2008
Southeast The Pacific Developing
Asia
Asia
2009
2010
Inflation eases
%
18
15
12
9
6
3
0
Central
Asia
East Asia
South Asia Southeast The Pacific Developing
Asia
Asia
2008
2009
2010
Current account to remain in surplus
% of GDP
15
10
5
0
-5
-10
-15
Central
Asia
East Asia
South Asia Southeast The Pacific Developing
Asia
Asia
2008
2009
2010
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 cut
Pakistan
Sri Lanka
Singapore
Kazakhstan
Philippines
Malaysia
Indonesia
China, People's Rep. of
Thailand
Taipei,China
Hong Kong, China
Korea, Rep. of
India
Viet Nam
-800 -600 -400 -200
basis points
0
200
400
Fiscal stimulus packages announced
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 unable
to counter export slowdown
GDP Growth
%
12
Inflation
%
8
9
6
6
3
4
0
2
-3
-6
0
East PRC HKG KOR TAP
Asia
2008
2009
2010
PRC=China, People’s Republic of
HKG=Hong Kong, China
East PRC HKG KOR TAP
Asia
2008
2009
KOR=Korea, Republic of
TAP=Taipei,China
2010
South Asia less affected by
global recession
GDP Growth
%
9
Inflation
%
25
20
6
15
10
3
5
0
0
South IND PAK BAN SRI
Asia
2008
2009
2010
IND=India
PAK=Pakistan
South IND PAK BAN SRI
Asia
2008
BAN=Bangladesh
SRI=Sri Lanka
2009
2010
Southeast Asia
near stagnation
%
9
GDP Growth
%
25
6
20
3
15
0
10
-3
5
-6
0
SEA INO MAL PHI SIN THA VIE
2008
2009
SEA=Southeast Asia
INO=Indonesia
2010
MAL=Malaysia
PHI=Philippines
Inflation
SEA INO MAL PHI SIN THA VIE
2008
SIN=Singapore
THA=Thailand
2009
2010
VIE=Viet Nam
Central Asia’s growth
to slow further
%
12
GDP Growth
%
25
Inflation
20
9
15
6
10
3
5
0
0
Central AZE
Asia
2008
GEO
2009
KAZ
UZB
2010
AZE=Azerbaijan
GEO=Georgia
Central AZE
Asia
2008
KAZ=Kazakhstan
UZB=Uzbekistan
GEO
2009
KAZ
UZB
2010
Expansion in the Pacific to abate
%
12
GDP Growth
%
15
Inflation
9
10
6
3
5
0
-3
0
Pacific PNG
2008
FIJ
2009
TIM
SAM
2010
PNG=Papua New Guinea
FIJ=Fiji Islands
Pacific PNG
2008
FIJ
2009
TIM
SAM
2010
TIM=Timor-Leste, Dem. Rep. of
SAM=Samoa
Rebalancing 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 large
% of world GDP
3
2
1
0
-1
-2
1990
1994
1998
United States
China, People's Rep. of
Middle East
Other industrial countries
2002
2006
Japan
Russia
Rest of developing Asia
Rest of world
2010
Policy options to rebalance growth
• 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 growth
• 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 you
Contact:
Asian Development Bank
6 ADB Avenue, Mandaluyong City
1550 Metro Manila, Philippines
www.adb.org
Key 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 longterm growth and welfare